There’s an uncomfortable situation we need to look at in this country . . . the student loan crisis. This debt disaster has become way too big and serious to ignore—and it’s affecting the lives of millions and millions of people. Right now, the total amount of federal student loan debt in the U.S. is over $1.76 trillion.1 You guys, that’s mind boggling.
Let’s review the simple (but shocking) facts around the student debt crisis so we can understand this problem and work toward getting this debt out of our lives for good.
The Stats on the Student Loan Crisis
Okay, stay with me here because this snapshot will help you see the bigger picture of the student loan crisis:
- As of 2022, federal student loan borrowers owe a total of more than $1.76 trillion just in student loans!2
- Student loan debt has surpassed all other types of debt in the U.S. except for housing debt, and student loan debt has increased by more than $165 billion since 2020.3
- There are currently about 44 million student loan borrowers in this country.4
- Sixty-five percent of students graduated with student loan debt in 2021.5
- The average amount of student loan debt is about $39,000.6
I’m glad you’re still reading, because we’re not done looking at the impact this student debt crisis really has on people’s lives (more on that later).
The History of Student Loan Debt
Believe it or not, student loans haven’t been around forever. They began in 1957 mostly to encourage more students (especially those in the fields of science, math and foreign languages) to attend college—all so Americans could have a chance to beat the Russians during the Space Race. And this strategy worked. College attendance more than doubled, shooting up from 3.6 million in 1960 to 7.5 million in 1970.7
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And can you guess what else shot up? That’s right, student loan debt. Yikes.
You might blame student loans on the huge rise in tuition costs (which are up 161% from 50 years ago), or the surge in inflation over time, or all the pressure from society to get a college degree . . . whatever the cause, there’s one thing we can all agree on: Student loans have reached crisis levels.8 And it doesn’t look like student loan debt is going to slow down anytime soon.
Student Loan Debt Totals by Age
It’s pretty common to think student loan debt is a problem that only young people and recent graduates are facing. But that’s definitely not true. Whether college was just a few years ago or several decades, if you’re reading this and you’ve been paying down your loans for what feels like forever, you know exactly what I’m talking about. And think about this: Some people are still paying off their student loans when their own kids are heading off to college. This cycle seems never-ending!
And if you find that hard to believe, here’s a breakdown of the current total student loan debt Americans carry, depending on their age range:
Total Student Loan Debt
You’ll see that people in the 35–49 age range carry the most student loan debt. Remember, these aren’t recent graduates who are just out of college: This group is made up of parents sending their kids off to college . . . while still paying off their own student loans!
And if you look at the 62+ range, you’ll see they’ve got $100 billion in student loan debt! This debt could be from their degree or maybe it’s what they borrowed to put their kids through school. Either way, this is a serious situation. Your 60s are supposed to be your golden years of fun and freedom—not a financial cage. Student loan debt shouldn’t be part of your retirement life.
The Economic Impact of Student Loan Debt
This shouldn’t come as a shock, but having piles of student loan debt makes millennials (and everyone else, for that matter) less likely to be able to afford major life purchases. (And if they do make these purchases, it takes them much longer.)
Research from Ramsey Solutions showed that nearly half (47%) of those who used student loans to pay for school are putting off big life moments—like buying a home, getting married, or having kids—because of their student loan debt.
It’s pretty simple: When people have to spend a large chunk of their income toward paying off their student loan debt, they have less money to save and spend on other things.
The True Cost of Your Student Loan Monthly Payments
There’s a reason why lenders make it pretty easy and painless to take out a loan. They know people (especially high school and college-age students) are eager to take the next step in their lives and will be drawn to how loans make college seem affordable.
In reality though, a loan costs so much more than we see on the surface. Watch our new documentary, Borrowed Future, for even more about the truth behind student loans.
Imagine this: You’re young, so you take out student loans to major in something you’re passionate about. You’re hopeful about the future. But that all changes after you graduate and realize you have to make monthly payments on those loans for years. (In fact, the average repayment period for students who graduated in 2021 is between 4 and 12 years.)10
That’s a lot of life to spend being trapped by debt payments.
How Are Monthly Payments Calculated?
Monthly student loans payments are based on a few variables. On average you can expect a typical monthly payment to be about $460.11 But how do loan companies come up with your monthly payment anyway?
That not-so-magic number is based on a few things, including the total loan amount, interest rate, number of years it takes to pay the thing off, and any other requirements the lender of that loan might tack on (some lenders have a required minimum monthly payment).
Let’s look at some averages and then some examples of how these things affect your total payoff amount in the real world.
Average Student Loan Debt per Borrower
Average Student Loan Interest Rate
Average Time It Takes to Pay Off Student Loans
Average Student Loan Monthly Payment
Good news—you don’t have to whip out a formula and run these numbers on your calculator or phone app. Just pop these numbers into our Student Loan Payoff Calculator. If you do that, you’ll see that if you’ve got $38,792 total debt at a 5.8% interest rate and you’re making a $460 payment each month, you’ll be stuck paying down that loan for nine years.
But wait, there’s more . . . You won’t just be paying the student loan amount. At the end of those nine years, you’ll have paid an extra $11,157.85 in interest alone. Yes. That $38,792 loan will actually cost you $49,949.85 when it’s all said and done.
And most college graduates aren’t making super high salaries right out of school. Recent college grads earn an average salary of $53,889 per year.16 That means they’re bringing home roughly $3,400 a month—after taxes. So, a $460 student loan payment will eat up around 14% of their monthly take-home pay!
But what would happen if those payments didn’t exist? What could that money do? How would your life be different? For this example, let’s run some numbers through our Investment and Retirement Calculator. Say a 21-year-old graduate started investing that $460 every month with an average 10% return instead of putting that money toward a student loan payment. By the time they retire at 67 years old, they’d have over $5.3 million in investments.
Wow. Just imagine how that money could change your life and your family tree. Talk about living and giving like no one else!
What About Refinancing Student Loans?
Now that student loan relief is ending, you might be thinking about refinancing your loans. Student loan refinancing might sound like a quick and easy fix, but let’s face it, taking shortcuts is what gets people into student loan debt in the first place.
If you’re not careful when you refinance, you could end up with a higher interest rate or longer payment terms than you had before.
So, before you decide refinancing your student loans is the best solution for you, let’s get clear on a few things.
With refinancing, you’re basically asking a bank or private company to take all your student loans, pay them off, and give you a new interest rate and payment terms. They spotted you the money, so now you owe them.
Student loan refinancing is the only type of debt consolidation we recommend. But it isn’t for everyone. (You can learn more about refinancing and if it's right for you in our Guide to Getting Rid of Your Student Loans.) But you should only refinance your student loans if:
- It won’t cost you anything to consolidate them.
- You can replace your variable interest rate with a lower, fixed interest rate.
- Your new net interest rate is lower than your current net interest rate.
- You don’t sign up for a longer repayment period.
- You don’t get so relieved by the thought of a single payment that you lose your motivation to pay off your debt fast!
That last point is so important. You never want to become so comfortable with your debt that you stop trying to pay it off faster.
Why Do People Rely on Student Loans?
Now that we’ve seen the hard facts of student loans, let’s look at the thinking (or lack of thinking) behind getting one.
There’s a mindset in this country that college degrees equal success . . . like they’re your ticket to a well-paying job and all your future happiness and success rest on that one piece of paper. So it’s no wonder that high school students are nervous, thinking they won’t get a decent job if they don’t have a degree. And it’s easy to believe the only way to afford their college degree is to take out a loan.
But neither of those ideas are true. Plenty of people who never went to college have “made it” with hard work. There are lots of opportunities out there to make good money without getting a college degree. Now, college can offer you an amazing education and fun life experience, but it’s not the end-all, be-all.
And depending on the field you’re in (like law or medicine) you might need a degree. But just remember: A degree is a degree no matter where it’s from—it’s 100% possible to get a degree without loans by picking a more affordable school. And if that means you go to a community college, good for you! Ten years later, it won’t matter, and you’ll be ahead of the game without any debt.
The Hidden Impact of the Student Debt Crisis
The truth is, student loans are meant to make college more accessible for people, but they actually create a lifetime of financial stress.
The negative effects of student loan debt aren’t just financial either. In our own research at Ramsey Solutions, we found that 53% of those who took out student loans regretted it. And 43% of those who took out student loans regret going to college altogether. That’s a lot of regret! And living in regret isn’t emotionally healthy for anyone.
But that’s not the only effect people deal with. Our research goes on to show that Americans with consumer debt (like student loans) are nearly twice as likely to lose sleep over their personal finances than those without. On top of that, 54% of Americans with consumer debt worry daily about money.
Here’s the thing: Higher education is great, but taking out a loan isn’t the only option to get that education. Not only does student loan debt weigh down your future (and stress you out), it also has a serious impact on the future of our country.
Are Universities Fueling the Student Loan Crisis?
I want to be clear here: I’m not saying that every university is adding to the student debt crisis, but college tuition keeps going up . . . not down. The cost of getting your degree has more than doubled in the last 20 years, and this trend isn’t going anywhere. Private universities are especially pricey—with students spending an average of over $54,000 for the 2020–21 school year.17
Income Share Agreements: The Misleading “Alternative” to Student Loans
Rising tuition costs are bad enough, but have you heard about income share agreements? That’s a contract between a college and a student where the school loans money to the student to cover education costs (kind of like an “I owe you”). The student agrees to pay a percentage of their income back to the school later on down the road. But whenever their income increases, so does their monthly payment.
Some people think this is better than a student loan, but is it really? The reality is students who do this are still in debt because they borrowed money—and they’ll have to keep making payments for years. Unfortunately, there’s no sugar-coating debt.
Nobody wants to graduate from college, get an exciting new job with a nice salary, and then face the fact that thousands of dollars of that salary will be going right back to their college. What a bummer. Instead, look at things like scholarships, tuition reimbursement programs, and part-time jobs to help pay for college with cash.
How to Get Yourself Out of Student Loan Debt
If you’re in the middle of this student loan crisis—carrying debt and slowly digging your way out with monthly payments—there is hope! You don’t have to stay in this cycle forever.
You can get yourself out of student loan debt for good. And you don’t have to rely on wishy-washy promises of student loan forgiveness from the government either.
You don't have to do this on your own! In fact, we created a video course all about how to make progress on your student loans. In The Ultimate Guide to Getting Rid of Student Loan Debt, you'll learn how to pay off your debt faster than you think and get the tools you need to actually make it happen.
I know the student loan crisis seems overwhelming to even think about sometimes. That $1.76 trillion number is serious business.18 But that looming national debt isn’t something you have to take down yourself. Just focus on how you can knock out your debt and teach your children to steer clear of student loans completely.
Don’t let the country’s student debt crisis create a personal crisis for you. Make the choice to get out and take the steps to move forward with your life. You can do this!
Guide to Getting Rid of Your Student Loans
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