Given the rising costs of a college education, it is no wonder the United States’ level of overall student loan debt has reached an all-time high. That being said, there is a lot of information swirling around about student loan debt nowadays. If you are a student, know someone who is, or would simply like to know more about this important financial situation, you should check out these surprising facts regarding student loan debt.
1. It Is Larger than Credit Card Debt
Although it may seem crazy, the amount of overall student loan debt in the United States is higher than the amount of overall credit card debt. The level of student loan debt is right around $1 trillion, while credit card debt is near $700 billion. Although the number of people with credit cards is higher than the number of people with student loans, student loans are typically more substantial in amount.
2. It Is the Fastest-Growing Type of Household Debt Since the economic crisis, student loans have become the fastest-growing type of household debt. Debts such as mortgages, home equity loans, car loans, and credit cards have all declined or stayed the same, but student loan debts have continued to grow.
3. Delinquencies Are Common
Millions of people who carry student loan debt are delinquent on their payments. It is estimated that nearly 10% of all outstanding student loan borrowers are in default, meaning they have not made a loan payment in over 270 days. One of the biggest contributing factors to the high number of delinquencies is the lack of jobs. Once students graduate, they are not able to find jobs that match their degrees. Without jobs they have no money to pay off their student loans.
4. It Cannot Be Discharged Through Bankruptcy
Student loan debt is one of the only types of debt that cannot be discharged through a bankruptcy judgment. This is in part because the federal government supplies and backs the majority of student loans in the United States.
5. Graduate Students Can No Longer Get Subsidized Student Loans
As a result of the Budget Control Act, which was signed into law in August of 2011, graduate and professional students are no longer eligible for subsidized federal student loans. They can, however, still take out unsubsidized federal loans. With unsubsidized loans, borrowers are responsible for the interest that accumulates on the loan while they are in school.
6. Congress Sets Federal Student Loan Rates
Although Congress is responsible for setting federal student loan interest rates and recently stopped the federal rate from doubling, it really does not mean much for borrowers. A 3.4% interest rate compared to a 6.8% interest rate only saves the average borrower $9 a month.
7. Funding Has Been Cut for Some Low-Income Families
Before July 1, 2012, families earning under $32,000 per year were automatically eligible for larger amounts of federal student aid. Now that the income limit has been reduced to $23,000 per year, fewer families will be eligible for the larger amounts of federal student aid. Now that you know some facts about student loan debt, you should have a better understanding of this important financial crisis. With higher tuition rates and more borrowers every school year, student loan debt is definitely not going anywhere anytime soon.
Guest post from Max Quinn