Who is most affected by student debt?
Black and Latino borrowers are disproportionately impacted by student loan debt. Due to racial wealth disparities, most Black and Latino college students come from low-income backgrounds and can count on only a fraction of the financial support.
Report: Debt Impacts Minority Groups Most
While 43 percent of all borrowers reported struggling to repay student loans, women and Black and Hispanic individuals expressed more hardship.
The so-called student loan crisis in the U.S. is largely concentrated among non-traditional borrowers attending for-profit schools and other non-selective institutions, who have relatively weak educational outcomes and difficulty finding jobs after starting to repay their loans.
In 2021, Americans' median student loan debt was between $20,000-$25,000. However, average student loan debt varies dramatically by race. Black adults in particular tend to bear the highest burdens across indicators, from student loan borrowing rates to default rates to average debt.
By the numbers: Borrowers between 35 and 49 years old owe the most in federal student loans, according to Federal Student Aid data. Details: Women typically borrow more for college than men, according to NerdWallet, a personal finance company.
Women borrow roughly 10% more federal student loans than men and pay them back at a lower amount per month than men as well. Women also borrow 4% more private student loans than men and pay them back slower than men over time.
Soaring college costs and pressure to compete in the job marketplace are big factors for student loan debt. Student loans are the most common form of educational debt, followed by credit cards and other types of credit. Borrowers who don't complete their degrees are more likely to default.
Certain groups are more likely to default than compared to others. For example, it would typically include people who are young, unemployed, or living in a single household. Alternatively, default rates may be representative of economic conditions.
Key Takeaways. Carrying student debt can affect your ability to buy a home if your debt-to-income ratio is too high. If you have too much student loan debt, you won't be able to save as much for retirement. Student loan debt can lower your credit score, especially if you fail to make on-time payments.
As of 2023, the average Gen Z borrower has an outstanding student loan balance of $24,473. 66.7% of older Gen Zers had $20,000 or less in student debt in 2022. The largest percentage (28%) of college students aged 24 and younger have between $5,000 and $9,999 in Federal Direct Loans as of March 31, 2022.
Which generation has the most school debt?
While Gen X may not have taken out as much student debt as Gen Zer's have had to, they're the generation shouldering most of the nation's outstanding debt. As of 2021, the average Gen Xer had $46,317 in student loan debt. 1.4 million Gen Xers between ages 35 and 49 carry over $500 billion in student debt.
White people, on average, are more likely to have mortgage debt than Black people, but Black people are more likely to have credit card debt (Dettling et al., 2017).
The Federal Reserve conducted an extensive analysis of the credit scores of thousands of men and women. They found that among men and women of similar ages, men and women have nearly identical credit scores, but the average man's score is slightly higher.
It's the result of a decades-long explosion in borrowing coupled with soaring education costs. The Federal Reserve data shows people under the age of 30 are more likely to have student loan debt compared with older adults – underscoring the crippling burden on another generation of Americans.
Today's student debt problem can be traced to the 1960s, when California Gov. Ronald Reagan cut higher education funding and raised tuition. Once considered a public good, higher education became seen nationwide as a private commodity.
Student debt will not be worth it in every situation. Borrowing a large sum and entering a low-paying career will either not pay off financially or take a painfully long time to do so.
The type of college with the highest default rate for all students is generally for-profit colleges. For-profit colleges often have higher tuition fees and lower graduation rates compared to public or non-profit colleges.
86% of white undergraduate students use student loans to pay for school. 58% of student loans go to white students. 50.8% of Black students use student loans. 14% of loans go to black students.
An average of 7% of student loans are in default at any given time. An average of 430,000 students defaulted between 2015-2018 after the second year of repayment.
Black students take out the most student loan debt for a bachelor's degree, followed by white students. Black bachelor's degree holders have an average of $52,000 in student debt. Eighty-six percent of Black students take out student loans to pay for college, compared to 68 percent of white students.
Is it smart to pay off student loans early?
There are many benefits to paying off your student debt early. You will save on student loan interest and get out of debt faster while improving your debt-to-income (DTI) ratio. With a higher DTI ratio and more disposable income, you could pursue other financial goals, such as buying a house or saving for retirement.
Student loans can delay borrowers' ability to achieve life goals such as getting married, having children, buying a home, pursuing further education, or finding an excellent job in their preferred field.
Most Gen Zers blame the economy for making it harder to get by, according to a recent report. Those just starting out are more likely to need a side hustle to help cover their monthly expenses.
For example, a new study by the Investment Company Institute (ICI) finds that “Gen Z households have nearly three times more assets in the [retirement] plan accounts (adjusted for inflation) that Gen X households did at the same age.” More Gen Z-ers have retirement plans set up and they've saved more in those accounts.
Americans — particularly Millennials and those with lower incomes — are becoming increasingly overextended financially: Credit card and auto loan delinquencies have not only surpassed pre-pandemic levels, they're the highest they've been in more than a decade.
