Student loans and the increasing size of their associated debt continue to grab headlines. The ongoing political environment and upcoming presidential election is significantly increasing the discussion of various proposals and ideas.
From a historical perspective student loans are certainly not new. The debt levels, however, are even more evident when you look at the debt loads of those who continue their education beyond the traditional four-year degree. And the problems created by student debt (either from the pursuit of secondary or advanced degrees) continue to be a concern after former students enter their first full-time jobs.
In addition to all the necessary purchases you need as you embark on your life journey, carrying a large debt load hampers you the most. And if you have any type of accident or illness that takes you out of work, this debt is exacerbated. You must deal with the extra costs associated with disability and medical costs – without an income – and still repay your loan. For the vast majority of people in this situation, the loan payments still due (unless you become permanently and completely disabled), and the risk of loan default is high. This can be very detrimental to you, your families, and your financial future.
Several insurance carriers studied the significant growth in college and post-graduate debt and responded by adding riders to their traditional disability insurance policies to address the continued loan repayment requirement. These outstanding student loans, in addition to the other financial stresses a disability can create, can be mitigated by the purchase of this rider. While certainly not a panacea, having such a program might help you focus on recovery if you need to leave work if you had an accident or a health issue.
I designed the remainder of this article to ensure you have a clear understanding of the breadth of the student loan debt issue.
|Quick Student Loan Statistics1|
|• $1.56 trillion in total U.S. student debt|
|• Average student loan debt per borrower: $32,731|
|• 11.5% of student loans are 90 days or more delinquent or are in default|
|• Number of student loan borrowers: 44.7 million|
|• Student loan debt for borrowers 60 and over has increased by 1,256% since 2004|
People use student loans to meet the cost of higher education when you or your family’s personal resources, grants and scholarships are insufficient to cover the cost of attendance. For low-income students, loans are a huge factor that enable them to go to school. These loans typically cover tuition, room and board, meal plans, textbooks, and miscellaneous necessities.
During repayment of student loans, renegotiation and bankruptcy are strictly regulated.2 As with most types of debt, student debt defaults are turned over to a collection agency, which can impact your financial well-being for years.
In 1992, the federal government began directly funding student loans and also established unsubsidized Stafford loans for students whose financial needs were not fully met by the subsidized loan program. The financial turmoil of the Great Recession caused most private lenders to stop making subsidized loans, and the federal government became the main issuer of student loans. Then, in 2010, the Health Care and Education Reconciliation Act of 2010 required all federal loans to be direct loans.
It’s important to note that private lenders offer student loans, but these are generally more expensive than federal loans.3
One factor that contributes to the amount of money you have to repay is the interest rate you pay on any loans you carry. Another factor is the new guideline developed by the federal government, which now determines who qualifies for a loan and how much they can borrow.
A third factor to keep in mind when applying for student loans is that colleges and universities continue to increase the tuition and housing costs, which subsequently increases the debt you will take on. According to the American Center for Progress’ report on the Student Debt Crisis, within the past three decades the cost of attaining a college degree drastically increased by more than 1,000 percent.4
Distribution of student loan debt in the U.S. 6
To place student debt in perspective, the average undergraduate student from the class of 2016 graduated with $37,172 in debt. This amount of debt can be a major burden. Monthly loan payments average $351, limit your ability to save money, and can lessen your quality of life.
In fact, 62 percent of college graduates reported that their monthly payments on debt were affecting their ability to pay their rent or buy groceries. Those with such debt report turning down luxury expenses such as concerts, and express concern over the ability to pay an electric bill. More than half of graduates say they put off major purchases, such as buying a car or a house, due to their debt.
The above factors influence the return of new graduates to their parents’ homes. Twenty-one percent of college graduates report still living with their parents a full year after graduation. Moving out of your parents’ house – and certainly buying a home – requires savings. Again, the need to repay your student loans reduces your ability to save money. This means, in turn, that graduates don’t put money away for emergencies; and they are certainly not putting money away for retirement.
On top of all of this, studies show that student debt is a problem long after you leave college. Just two decades ago, only four percent of people aged 55 to 64 still had student loan debt. That number is rapidly growing. In 2013, 30 percent of people in the same age group reported having debt from college.7
Another interesting thing to consider is how student debt varies when you consider race and gender. While most recent graduates have a high debt load compared to their first- year income, women and blacks are disproportionately carrying debt in comparison to their paychecks after leaving college.8
The issue of student loan debt is even more pronounced when you undertake post-graduate studies and specialized training programs. Graduate level debt statistics are frightening:
- Dental School: $260,000
- Medical School: $180,000
- Pharmacy School: $160,000
- Veterinary School: $140,000
- Law School: $140,0008
Given the breadth and depth of student loan statistics, let me leave you with the key takeaways:
- Student loans have lifelong effects. These effects can be seen throughout a person’s life and can continue into retirement.
- These lasting effects of student loans are important for students to be aware of and prepared for.
- Several insurance companies have added riders to certain disability insurance policies to help pay some of your ongoing loan payments while you deal with recovering from an accident or injury and being out of work.
- Some employers are sponsoring benefits to help their employees either fund the college costs of their offspring, or help the employee help their children pay these loans.
- While we should applaud people for their goal of attending college, careful consideration of the debt associated with attaining a degree and ways to deal with that debt should be considered.
- People who go on with graduate studies or continue specialized training will most likely have even greater debt burdens as they enter the workforce.
1 Federal Reserve Bank of New York, Research and Statistics Group, 2018.
2 Forbes, Student Loan Debt Statistics In 2019: A $ 1.5 Trillion Crisis, February 25, 2019.
3 Forbes, Student Loan Debt in 2017: A $ 1.3 Trillion Crisis, February 21, 2017.
4 Fortune, America’s Student Loan Debt Crisis Is About to Get Much Worse, October 17, 2018.
5 Forbes, Student Loan Debt Statistics In 2019: A $ 1.5 Trillion Crisis, February 25, 2019
6 Student Loan Hero, A Look at the Shocking Student Loan Debt Statistics for 2019, February 4 , 2019 .
7 Magnify Money, Student Loan Debt’s Effect on the U. S. Economy, February 5, 2019.
8 Value Penguin, Average Student Loan Debt in America: 2019 Facts and Figures.
9 Make Lemonade, Student Loan Dept Statistics for 2019.