It’s that time of year again. Over 18 million students in the United States are returning to school in the noble pursuit of a higher education. Many have worked hard and earned academic scholarships. Others have taken on part and full-time employment through high school and summers to pay their tuition in full. And, of course, some are fortunate to have generous relatives who contribute a substantial amount to cover the costs of tuition and living.
But for over 40 million students, private and federal student loans are the only option left to cover tens of thousands of dollars in tuition fees. Tuition fees for colleges and universities can surpass more than $20 thousand a year, and in private schools that may be substantially higher.
Unlike scholarships or bursaries, loans are subject to repayment at a set interest rate. Every year, students accumulate loan debt that rises the longer they postpone a payment plan. As a result, national student loan debt can reach staggering heights. If you’re a student, you may already be aware of the following shocking – and frankly depressing – facts about student loan debt in the United States. However, if you’re a prospective student, you’re going to want to keep reading before you jump at that chance for a private loan.
10. Two-Thirds of Graduates are in Debt
More than half of university and college graduates find themselves in some amount of debt. From future teachers to medical professionals, graduating students — except the lucky few with scholarships or some other payment plan — can expect to have a substantial amount of their future income absorbed into paying off their loans. It’s often a catch-22 situation. As the wealth gap increases, people attempt to earn an education to secure a higher paying job than their parents. But financial struggles force them to take on student loans. When they do graduate, their debt is so high, the struggle in poverty continues indefinitely, even if they do find full-time employment.
9. 53% of Recent Graduates are Unemployed
It’s hard enough paying off nagging student loans with full-time employment — that is, if recent graduates can find work in the field of their study, an option that is becoming less and less likely. According to the Associated Press, about one-and-a-half million (53%) recent graduates from college or university are unemployed right out of the gate, usually forcing them to borrow even more from other lenders just to keep their heads above water.
8. Profit Loses of Auto Industry Due to Student Debt – $6 Billion
The United States relies a great deal on the prosperity of their auto industry, one of the biggest contributors to the health and well-being of their economy. Not only are automobile sales a billion dollar industry, they employ millions of people around the country. The loss of dollars generated by the auto industry is not something anybody wants (remember the government bailout of General Motors?). But because students are saving every last penny to pay off their staggering student loans, less and less of them are buying vehicles, causing the auto industry to lose about $6 billion a year in profit, according to One Wisconsin Institute.
7. More People Default on Student Loans than on Credit Cards
Most credit card companies have no problem having students as customers. After all, they’re one of the highest spending groups in the United States. Student loans pay off tuition and supplies, but they don’t always cover living expenses that can be very high in bustling cities. Student loans are becoming so hard to pay off that between 2011 and 2013 the delinquency rate of student debt surpassed credit cards, according to the Consumer Financial Protection Bureau.
6. Average Student Loan Debt – $26,000
Imagine what you could do if you had twenty-six grand. Buy a boat? Renovate the house? Go on a long vacation? Instead of saving money from their new-found employment, students are paying off an average of $26,000 in loan debt, according to reports by the Institute for College Access and Success. The longer it takes to pay off the loan, the more interest rates increase the debt, and the harder it is to pay off. The new boat and house may have to wait for recent graduates until a few years down the line.
5. College Tuition has Risen by 400%
It stands to reason that if colleges and universities made a stand to reduce tuition fees, student loans would decrease and so would student debt. However, education institutions around the United States are doing anything but. In fact, instead of decreasing tuition to a manageable sum, tuition fees have risen 400% since in the last 40 years. Consequently, students are borrowing more money to cover the costs in their pursuit of higher education, and are more often overwhelmed with debt upon graduation.
4. Average Time to Pay Student Loan – 14 Years
Many graduates do succeed in paying off their loans. They don’t want to be in debt, and many are responsible enough to pay what they can every month. But with more than one million students unemployed, and the job market dwindling, the amount students can afford to pay is decreasing. Even with regular payments, it can take up to 14 to years to completely pay off a student loan in full, according to a report by RateSupermarket.ca. For recent graduates, that can be a life time. Students spend almost double the time paying off their loan than the time they spent earning their degrees.
3. Annual Loan Debt – $110 Billion
If you thought the auto industry was a profit powerhouse, you might want to consider that student loan debt has risen annually to $110 billion according to reports from Larouche Pac. In an ideal world, employed graduates would be contributing that kind of money to the U.S. economy by purchasing things like cars, homes, and other economic drivers. Instead, they contribute this massive amount of money through their increasing debt repayments. But who’s profiting? Well, anybody who has money owned to them from student loans including banks, the state, and the federal government.
2. Loan Debt Rate is $2,853 Per Second
The general loan debt rate is $2,853 per second according to the student loan debt clock from FinAid. Add up every second in a minute, hour, day, week, month, and year, you get the total student debt revealed as the number one shocking fact on this list…
1. Total Student Debt – $1 Trillion +
So how much does all of this student debt add up to? Considering the figures we’ve exposed in this list, it’s bound be such a huge number that even some of the wealthiest corporations in the world have trouble reaching it. As of May 2013, the total student loan debt reached over $1 trillion and climbing according to the Consumer Financial Protection Bureau.
But maybe it’s better to look at this student debt in a more positive light. Maybe it indicates that more students are attempting to get a higher education by attending a college or university. That’s a good thing, right? Some may say it’s surprising that even though students are certain they will accumulate debt by choosing to enter into post-secondary education, they continue to do it year after year. Others will point out that those without a university degree may be debt-free initially, but their potential future salaries are capped at a pretty low bar. Let’s hope it all pays off in the end…