Student Loan Debt

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Facts & Figures and Strategies for Getting Out of Debt Fast

Due to the rising cost of college, the phrase “student loan debt” now makes just about anyone cringe. According to Forbes, in 2018 student loan debt reached $1.5 trillion, second only to mortgage debt and beating credit cards and car loans. On the flip side, college enrollment is up, meaning more people are choosing to pursue a college education. While student loans do provide opportunities for many who could otherwise not earn a college degree, the resulting debt can easily become a financial burden long after graduation. Get more information on the shocking statistics and learn what you can do to limit your debt or get out of debt quickly.

How Much Do Students & Graduates Owe?

More than 44 million borrowers collectively owe a staggering $1.5 trillion in student loans. And that’s just within the U.S. alone. The following section provides various snapshots of student loan debt to give you a better picture of what the numbers looks like. Most figures are based on federal student loans. For more information on the data, all sources have been provided.

Average Student Loan Debt by State


Source: The Institute for College Access & Success, 2016

Median Student Loan Debt by School Type

Public two-year$11,650
Nonselective four-year$21,230
Selective four-year$25,890
Most selective four-year$26,490
Source: College Board, 2013-14

Delinquency & Default Rates

Because student loan debt is so high for graduates, some struggle to keep up with payments. If you miss a scheduled payment on your federal loan, it’s considered delinquent. After 90 days it will be reported to the main credit reporting bureaus, which will have a negative effect on your credit score.

Default is when you stop paying your loans all together. This can ruin your credit, cause garnishment of wages and tax returns, and will prevent you from qualifying for additional federal financial aid. Federal loans typically default after nine months of delinquency. This timeframe can vary for private loans and depends on the rules and conditions set forth by the lender. Some private loans go into default as soon as you miss a payment. The following section breaks down delinquency and default rates.

Default Rate by Income & School Type

Above $55,000 mean income351320
Below $55,000 mean income422130
Source: Federal Reserve Bank of New York, 2017

How to Approach Student Loans

For many potential students, the opportunity to pursue a college education can only happen with financial help, often by way of student loans. Whether a student is right out of high school and going to college immediately, an older student deciding to go back to college for a career change or someone going back to finish a partial degree, it’s important to think and plan ahead. Below are strategies potential borrowers should consider before taking out a student loan.

Fill out a FAFSA

Many grants and scholarships are based on the financial information you and your parents provide on the FAFSA so make sure to complete this step to be considered for free money.

Exhaust all other avenues of financing first

While it may seem easier take out loans for all college-related expenses, taking time to see what other options are out there is a must. Grants, scholarships, paid internships, work-study and employer tuition assistance are all ways to pay for college without accruing any debt. A Google search alone will turn up many scholarships and grants that you may be qualified for and will lead you to several online scholarship databases. Your college’s financial aid department is also a great resource to see what internal and external scholarships you are eligible for. State, corporate and local organizations may also provide valuable scholarship leads.

Start researching and applying for scholarships early on

The search for scholarships is time-consuming and can be overwhelming, as a lot of scholarship applications require paperwork, essays and references. However, the time commitment is worth it – scholarships can greatly reduce the amount of loan money needed and might even eliminate the need for borrowing all together. The less you borrow, the less interest you accrue, which means lower, more manageable payments down the road.

Work while in school to cover other expenses

Work as much as possible without sacrificing time to do schoolwork. This can help you pay for college-related expenses as you go. For example, try saving for and paying cash for books or rent books each semester. Check to see if your college offers an interest-free payment plan for tuition so you can pay the school directly rather than take out student loans or arrange to pay for one class per term to lessen the amount borrowed. Pay for room and board by working rather than taking out extra loans, ask for help from family or live at home to further cut expenses.

Consider a community college

You may have an idea of what your dream college is, but does it come with too steep a price tag? Can you get an equally good education at a different college with a lower cost? Student loan expert and founder of Tim Stobierski suggests attending a community college for two years to combat future student loan debt, as tuition is much cheaper at a two-year college. You can then transfer several credits or your entire associate degree towards a bachelor’s degree at the four-year college of your choice. Speak with college advisors at both the two-year and four-year colleges you are interested in ahead of time to ensure the credits you are planning to earn will be transferable.

Determine which loans are best for you

If you do need to take out a loan, carefully research your options before applying and compare interest rates between lenders to find the lowest rate. Stobierski says, “Generally speaking, federal student loans are always preferable to private student loans because they come with lower interest rates and important protections and benefits (like forbearance/deferment options, forgiveness and payment plans) that are hard to find in the private loan marketplace.” Other factors to consider when finding the right loan are whether parents or another co-signer will be needed when applying for the loan, whether you’ll have a fixed or variable interest rate, loan re-payment flexibility and loan consolidation options.

Get an idea of what future loan payments will be

While it can be hard to visualize life after graduation, it’s important to see how those loan payments will fit into your budget. Use a student loan calculator to get an idea of what loan payments will look like after graduation. Calculations are based on factors such as the size of the loan, interest rate and length of the loan term. Keep in mind that you might not find a high enough paying job right out of school, so borrowing the least amount possible will help keep interest from accumulating, which will make payments more manageable.

Tips for Paying Off Loans Quickly & Painlessly

Once you start making payments, there’s a lot you can do to stay on top of things and pay off your debt quickly and painlessly.

  • Do not ignore your student loans
    While in school, it can be easy to forget student loans exist and many students end up sticking their heads in the sand when it comes time to start making payments. Meeting with a financial advisor as much as you feel necessary plus taking advantage of entrance and exit loan counseling appointments can help. Making payments towards loans while still in school or at least paying off interest as it accrues each month are great ways to keep your loans from being put on the back burner or ignored completely. The added benefit to paying while in school is that payments will be lower after graduation.
  • Get on a budget and stick to it
    While this can’t be stressed enough, it’s often easier said than done, and many people give up in frustration before they ever get started. Luckily, there are several online resources and apps that can help you create and manage a budget. If technology isn’t your thing, check out budgeting books from the library and meet with a financial advisor to create a plan. Living without a lot of extras and being mindful of spending now means staying in control of money, which can save you from crippling student loan debt after graduation.
  • Stay on top of payments
    It’s your responsibility to make payments on time, even if a notice is not received. Typically, lenders send payment reminders, but if a notification gets lost, you might be surprised to discover you missed your first payment, so staying on top of payments each month will keep you in good standing credit-wise. If you are unable to make a payment, or need to change payment plans, contact your lender as soon as possible to get set up, so you don’t end up delinquent. Grace periods vary based on type of loan and lending institution, so check with your lender. Federal student loans typically have a grace period of 6-9 months after graduation. Check to see if an automatic monthly payment plan is available. In addition to ensuring payments are made on time, automatic payment plans may also provide a slight interest rate deduction by the lender.
  • Make loan payments a priority
    Paying off your loans as quickly as possible should be a top priority. The longer you take to pay off a loan, the more interest is accrued, which ultimately makes the overall amount to pay off higher. It can be a real drag to have ballooning loan payments hanging over your head, so being proactive can help alleviate a lot of stress. Cutting back on your spending, picking up a second job and earmarking a certain percentage or dollar amount of your paychecks for student loan payments each month can really help. With discipline, hard work and some sacrifice, it may be possible to be debt free in as little as 3-5 years, depending on your loan amount.
  • Use extra cash to make higher payments
    Pay the standard payment as indicated by the lender but pay more whenever you can. “Generally speaking, graduates should aim to pay as much as possible. If they can afford to make standard payments, they’ll pay off their loans much faster (and much more cheaply) than using any other repayment plan,” says Stobierski. “Paying more will, of course, allow them to repay their loans even faster and save them even more money in the long run.” Whenever you have extra income such as a tax return, annual bonus or extra money due to lifestyle changes, use it to make a higher monthly payment.
  • If you fall behind on payments, change your payment plan
    For federal loans, paying the standard is the best option, as the loan can be paid off within ten years. However, life happens and for some, the standard payment may be too big a burden. Federal student loans offer more flexibility than private loans, with payment plans such as income-based (depends on current earnings), graduated (increased payments over time based on projected income) and pay as you earn plans. The drawbacks of these plans are that they stretch loan payments out longer, which increases interest owed over time, making your overall amount higher. Stobierski says, “If graduates can’t afford standard repayment, they should opt for the repayment plan that allows them to pay as much as possible while still making life livable. Some repayment plans may seem extremely tempting because of low payments (sometimes as low as $5 a month!) but these plans tend to cause loan balances to explode over time.”
  • If you’re in trouble, consider a loan forbearance or deferment
    If you’re in a serious financial bind, check with your lender to see what can be done to put payments on hold. Federal student loans come with forbearance or deferment options, which can give you some breathing room by allowing you to put payments on hold for a 6-month period. These options can be helpful in case of unexpected emergencies such as inability to work due to family or health problems, job loss or other unforeseen financial issues. Although interest still accrues while payments are on hold and the overall loan cost and payment time will be extended, these options are still better than defaulting, as you will stay in good standing with your lender by going through the proper forbearance or default paperwork/approval process. These options, however, should only be used as a last resort.
  • Look into Loan Forgiveness programs
    Loan forgiveness programs may be an option for those employed in specific areas, such as the military, public service, health care and teaching. There are very strict requirements for Loan Forgiveness plans, such as a specific time commitment to the eligible profession and full-time employment. This can be an excellent option for qualifying graduates, as it is possible to have a portion of or all loans discharged.

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