The cost of obtaining a college education has been increasing steadily over the years. Today, most college students require the help of scholarships and student loans to cover the costs. However, the average student loan debt has risen along with the price-tag of college.
Here’s a look at the average student debt in the U.S. in 2023.
Important Things to Keep In Mind
Aside from free gift aid like scholarships, taking out a federal student loan is the best option students have for borrowing money for college. Sometimes, even that is not enough to cover the full cost of education. In that case, students then turn to private lenders for additional student loans, although private student loans are very much more expensive.
All student loans, except for subsidized loans, start accruing interest from the day they are disbursed. This means the interest keeps adding up right through the life of the loan. By the time a student has finished paying off their dues, they would have paid back several times more than they borrowed. All of this makes for staggering statistics.
Student Loan Debt Statistics in 2023
As of April 1, 2023, the total amount of U.S. student loan debt is estimated to be about $1.757 trillion with the outstanding federal loan balance of $1.635 trillion accounting for about 93% of all student loan debt.
In theory, those who graduated more than 10 years ago should ideally have cleared all their debts by now. The standard repayment term for federal student loans is 10 years. However, the majority of borrowers find it impossible to stick with this repayment term. Most choose to lower the monthly payments, which extends the life of their loan. Statistics indicate that most graduates take a little over 19 years to finally clear all their student loan debt. Currently, about 50% of student borrowers still owe about $20,000 each on outstanding loan balances about 20 years after joining college.
So what is the average student loan debt in America in 2923? The latest report dated May 22, 2023 puts the total average student loan debt at about $40,114 per borrower. This includes both, federal and private student loans. 43.8 million borrowers, which accounts for 92% of the total number of borrowers, have federal student loan debt. The average federal student loan debt is reported to be about $37,338 per borrower. The estimated private student loan debt is about $54,921 per borrower.
On average, every student borrows a total of over $30,000 to complete their bachelor’s degree. Each borrower pays an average of $393 every month towards their loan payment. This is up from the estimated $227 that borrowers paid every month towards their loan in 2015.
Comparing Student Loan Debt With Other Debt
House mortgages have traditionally been the largest form of debt in America. This is followed by auto loans and credit card debt. This has been steadily changing over the past few years. Since 2004, student loan debt has surpassed both auto loan and credit card debt. In 2023, it continues with this trend – being lower than mortgages but higher than auto loans and credit card debt.
So What Can You Do To Lower Your Student Loan Debt?
Although the statistics look grim, there are things you can do to lower your student loan debt. By understanding the terms of your student loan and repayment options, and implementing a few smart financial strategies, student loan debt can be manageable.
Here are a few things you can do:
1. Consolidate Federal Student Loans
If you have multiple student loans, it can be beneficial to consolidate them into a single loan. Single loans are easier to manage as you only have to keep track of one due date and one repayment amount. This minimizes the odds of forgetting a payment, resulting in late payment fees, interest or even default.
2. Refinance Student Loans
Is the interest rate on your loans too high? Not a fan of your loan’s repayment plan? Want to lower monthly payments to make them more affordable or increase them so you can pay the debt off faster? If you want to change anything about your loan, consider refinancing it.
Everyone has different needs, salaries, priorities, and living conditions. Therefore, there’s not one-size-fits-all method for repaying loans. Refinancing can make the student loans fit better to your current livelihood. You could save money too if you qualify for a lower interest rate because of your improved credit score.
3. Explore Federal Student Loan Forgiveness
Depending on your career path, you may be eligible for federal student loan forgiveness. Those working in public service—such as nurses, teachers, firefighters, the military, government workers, or non-profit workers—can have parts of their federal loans forgiven after working a certain number of years in their field.
4. Exhaust All Other Forms of Financial Aid Before Taking Private Student Loans
Don’t rush into taking student loans before first exhausting all other forms of free and low-cost financial aid. Start by applying to as many scholarships and grants as you qualify for. Both of these are types of free financial aid. Scholarships are awarded based on merit, grants are offered based on need.
If you still require funds, pursue federal student loans first. They have lower interest rates and more flexible repayment plans. You must file the FAFSA, (Free Application for Federal Student Aid) to avail of federal financial aid.
Private student loans are the most expensive of all borrowing options. Only consider applying for them after you’ve exhausted all other resources. if you do have to take out a student loan, make sure to research and compare rates to get the best option for you.
With some forethought, a solid plan, and some financial discipline, debt can be manageable, and you can avoid being saddled with high student loan debt.
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