Gwynn Group — March 29, 2019
It’s no secret that the United States and its citizens struggle with racking up enormous amounts of debt. With social media platforms like Instagram at the peak of popularity, our image is everything. We want the most lavish houses, show-stopping cars, and high-end clothing we can find to keep appearances. This type of lifestyle requires either a substantial disposable income or, in most people’s cases, a credit card burning a hole in their pocket and cripplingly large loans (which, let’s be honest, are also put on credit cards).
While credit card, auto loan, and mortgage loan debts have been concerns for Americans for quite some time, a newcomer in the form of student loan debts is on the rise and getting more severe each year. Although nothing holds a candle to the nearly $15 trillion in mortgage loans, student loans have secured a respectable second place standing in the contribution towards the U.S. government’s $22 trillion public debt.
The cost of attending college is continuously climbing, forcing students to either drop out of school or continue to go further and further into debt. With the average student loan being around $33 thousand with an interest rate of 4.45–7% in 2018, college graduates will spend years making monthly payments only to find out that most of their money is paying off accumulated interest. It’s no wonder America’s student loan debt reached $1.24 trillion in 2014. As if that wasn’t high enough, in the last four years, the amount of debt has risen 81% from $1.24 trillion to $1.53 trillion in 2018 — a nearly $300 billion difference. The more daunting realization is that these numbers don’t appear to be getting any smaller in the nearby future.
We know that the collective pool of student loan debt was $1.53 trillion in 2018, but how much does each college student owe by the end of graduation? The good news for most of the population is that over half of borrowers’ loans add up to be $20,000 and under. How is this possible when, according to CollegeBoard, the average yearly cost of a four-year university for in-state students is $9,410?
$9,410 tuition per year x 4 years = a $37,640 degree
The $17,000 difference in tuition and loans consumed could be due to many factors, including scholarships, a part-time job, or financial help from family members. Whatever the case, even the full price of $37,640 for tuition is a breeze to payback compared to the 2% of the population who owe over $200,000 in student loans. Thankfully, those few students have most likely become doctors and lawyers capable of paying off their astronomical debt.
With the infamous catchphrase, “Everything’s bigger in Texas,” it’s no wonder the Lone Star State is at the forefront of the number of borrowers within the United States. Not to be outdone, however, is California, Florida, and New York following suit. Each of the four states has over four million borrowers within their limits. We infer that the number of borrowers directly correlates with the state’s population, with California leading the nation, followed by Texas, Florida, and New York. Coincidence? We think not.
Here’s where we start to break down the typical student loan debtor with a visualization comparing the number of borrowers with dollars outstanding. Because the two bar charts shown above are correlated, they have a similar appearance. The higher the number of borrowers, the more dollars outstanding they accrue. There are approximately 10 million borrowers between 19 and 24 years of age compared to the 20 million who are between 25 and 34. The difference between the two age categories is mirrored in dollars outstanding with 19 to 24 year-olds owing around $200 billion and 25 to 34 year-olds owing over $600 million.
The charts also tell the story of the typical life of a student loan. Eighteen is the average age of college freshman. These budding students gain a taste of freedom, poor dietary habits, and the first of many student loans. As they grow older and more advanced in their education, their student loans grow larger. However, if most students graduate college at around 21 to 24 years old, why are most borrowers 35 to 49? With typical loan payback periods lasting ten years after graduation (if you don’t defer payments), people are still paying back the student loans they took out when they were 18 years old well into their 30’s. Don’t even get us started on those who end up going to graduate school!
Now that we’ve built a profile of student loan debtors based on their ages, loan amounts, and geographic locations, we’ll begin to look at which type of school they attended. A private education sounds appealing to most parents concerned with their children’s’ future; however, these schools come at the steep price of $32,410 a year for tuition. These rates could explain why $600 million, the majority of student loans, are used to attend public universities over private, proprietary or foreign colleges.
The final step in discussing the student loan debt crisis is determining the entities in which students are indebted. The chart above shows that the Pennsylvania Higher Education Assistance Agency (PHEAA) is owed the highest amount in outstanding loans at $350 billion, a nearly $100 billion difference from the next most used lender, Great Lakes Higher Education Corporation. While technically Great Lakes should be included in the not-for-profit servicers category, because the company is so large, we felt that it should stand alone for comparison.
Thankfully for the two companies, their fellow lenders, and college students everywhere, a majority of borrowers are in the repayment stage of their loan status and are slowly making progress to paying off their debts.