The Truth About Student Debt: 7 Facts No One Is Talking About

The Truth About Student Debt: 7 Facts No One Is Talking About

The facts seem stark: About 45 million Americans now owe a stunning $1.6 trillion in student debt. That’s roughly one in every four adults, nearly double the number who had higher education loans 15 years ago. Among millennials, the number is one in three, often cited as a reason why so many young adults can’t afford to buy a home, get ily or move out of their parents’ basements.

The Truth About Student Debt: 7 Facts No One Is Talking About

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Meanwhile, the average amount that undergraduates borrow has shot up 60 percent over the same period, and defaults on loans have jumped as well. More than one-quarter of students can’t keep up with their payments 12 years after borrowing, vs. 18 percent just a few years ago, and that number is projected to hit 40 percent by 2023. With default can come heartache: It can ruin people’s credit scores, wreck their ability to borrow or rent an apartment and, in some areas, cause their professional licenses to be revoked.

Given all that, it’s not exactly shocking that a lot of people are using the word “crisis” to describe student debt these days. Or that college loans and the pain they can cause have become a hot topic in the 2020 presidential campaign. Nearly every candidate is turning up the hyperbole and offering a proposal for debt relief, from the modest (hello, Kamala Harris, Beto O’Rourke) to the sweeping (nice to see you, Bernie Sanders, Elizabeth Warren).

But while there’s definitely no denying that some people with student debt are having serious problems, the notion that the entire system is completely broken is just plain wrong, many experts say. Moreover, the prevalence of this total-disaster narrative obscures some key facts about borrowing-like for instance, that $100,000-plus balances are actually rare and that it is payday loans Fort Worth the students with the smallest amount of debt who tend to be the ones who struggle the most.

“Calling it a crisis misrepresents the situation,” says Sandy Baum, senior fellow for the Center on Education Data and Policy at the Urban Institute. “Not everyone with student debt is having his or her life ruined. The truth is that access to student loans increases educational opportunities for lots of people, and for many it’s an investment that pays off well. It’s also true that some people have severe problems because of the loans they’ve taken out.”

A soon-to-be released survey by the Washington think tank New America shows that misperceptions abound. Respondents overwhelmingly believed that college loans were the largest source of consumer debt in the U.S. (it’s actually mortgage debt, by a landslide) and dramatically overestimated how much students typically borrow and the percentage of people who default on their loans.

“I worry that we’re giving students the message that borrowing is bad and that you should never borrow a cent for higher education,” says Rachel Fishman, deputy director for research of the education policy program at New America. “Given how much college costs, for most families, that’s simply not realistic.”

Here are six key facts about student debt in the U.S. that often slip beneath the radar but are critical to informing the national discussion about how to reform the system.

Believe it or not: Borrowing has fallen for seven years in a row.

Perhaps the most eye-popping figure commonly quoted about student loans is $1.6 trillion. That’s the total amount of outstanding higher education debt in the U.S., and it’s been growing exponentially since 2006, when it weighed in at a mere $480 billion. As a result, student loan balances today are bigger than outstanding credit card debt, bigger than what people owe on auto loans, and second only to mortgages and home equity borrowing-collectively, $9.7 trillion -as the country’s largest source of consumer debt.

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