Student Debt

Editor’s note: The accumulation of student debt—how it evolved and its effect on households and the economy—is intertwined with the topic of college tuition. This page focuses on understanding costs owed by borrowers; see our resources on college tuition here. 

Background

For decades, higher education has been a key step to middle- and upper-class prosperity for millions of Americans. But the rising costs of a degree—tuition, fees, living costs, and more—have left many with significant debt burdens after leaving school.

As of the first quarter of 2024, roughly 43 million Americans held a cumulative $1.6T in federal student debt—a sum equal to the 12th largest economy in the world. Factor in private loans, and the total rises to $1.74T.

The average household with student debt owed around $55K, with estimated payments of $500 per month.

Covering Costs

Average annual tuition now ranges from around $10K for an in-state public university to almost $40K for a private institution. Those figures have tripled since 1970, accounting for inflation.

When factoring in associated costs like housing and fees, the total cost routinely exceeds $100K for a four-year degree at a public school.

Parental contributions (39%) and scholarships and grants (25%) provide the primary funding for the average academic year (see breakdown). Student loans cover about 10% of the cost—although family contributions include loans parents take out, too.

Data suggest two decades after college, half of borrowers still owe an average of $20K on their loans.

Who Owes the Most?

The distribution of total student debt—who owes what and how much—is highly skewed and depends on several factors.

About 15% of borrowers owe less than $5K, and one in three has less than $10K in outstanding student debt. Conversely, 7% of borrowers owe more than $100K yet account for 40% of all outstanding federal debt. See tables here (“Portfolio by Debt Size”). 

A quarter of borrowers were enrolled in graduate programs but account for half of all outstanding debt. For those pursuing law or medical degrees, the average student debt is nearly $190K—about six times that of average bachelor's degree debt.

Millennials and Gen Xers currently hold the bulk of outstanding student debt. Those aged 25 to 49 (which includes some older Gen Z and younger Gen X borrowers) owe more than $1.1T. 

Racial disparities in borrowing remain, most notably in the length of repayment. One long-term study found the median Black borrower still owed 95% of the loan amount two decades after graduation (note: the cohort tracked entered school in 1996-97).

As of 2021, roughly 3 million borrowers (about 7%) defaulted on their debt. That number was down from a 2016 peak of around 5 million.

Future

Americans' total amount of outstanding student loans now exceeds the country's credit card debt ($1.3T). Some economists argue the burden creates a net drag on the economy.

Partial or total outstanding loan forgiveness has become a hotly debated policy issue, with advocates arguing it would have positive economic benefits and critics countering it disproportionately helps upper-income households (see overview).