Who owns student debt?
Whoever gave you the money for your education (the lender) is usually who owns your student loan. This is either the federal government or a private company. But your loan servicer is who handles the loan repayment—and who dishes out the consequences if you don't pay up.
Most student loans — about 92.5% — are owned by the government. Total federal student loan borrowers: 43.2 million. Total outstanding federal student loan debt: $1.60 trillion.
The federal government or a commercial entity owns your student loans. Private companies own all private loans. The U.S. Department of Education holds most federal loans. Both the Department of Education and private institutions partner with third parties called student loan servicers.
You repay your Direct Loan(s) to the U.S. Department of Education via a Servicer they assign to you. Before you take out a loan, it's important to understand that a loan is a legal obligation that you will be responsible for repaying with interest.
Households with income in the 51st to 75th percentile hold 32% of student loan debt. 20th to 40th percentile households owe 22% of all outstanding student debt. The lowest income quartile (25th percentile and lower) owes 5% of all student loan debt.
Generally, there are two types of student loans—federal and private. Federal student loans and federal parent loans: These loans are funded by the federal government. Private student loans: These loans are nonfederal loans, made by a lender such as a bank, credit union, state agency, or a school.
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.
Americans own $1.77 trillion in federal and private student loan debt as of the second quarter of 2023. That's up 1.25% from the second quarter of 2022. $128.77 billion of that total through March 31, 2023, is private student loan debt.
Here are the highlights: * The privatization of Sallie Mae in 1996 had a dramatic impact on student lending. During the Clinton administration, the federal government relinquished direct control of the student loan program, opening its bank to corporations concerned with profits, not diplomas.
About the Topic. The federal government began guaranteeing student loans provided by banks and non-profit lenders in 1965, creating the program that is now called the Federal Family Education Loan (FFEL) program.
Where does student loan money come from?
Student loans can come from the federal government, from private sources such as a bank or financial institution, or from other organizations.
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).
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.
Black borrowers are disproportionately burdened by student loan debt. As of 2019, a typical Black student loan borrower will still owe 95% of loans 20 years after starting college, compared to 6% for a white borrower.
Student loan debt slows new business growth and limits consumer spending. Broad student loan debt forgiveness may help boost the national economy by making it more affordable for borrowers to participate in it.
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.
In the good debt versus bad debt debate, student loans fall into a gray area. They can be considered good debt because the money you're borrowing to attend school is your ticket to earning a degree and getting hired at a well-paying job. That debt should pay itself off over time with a lucrative career in place.
Many experts and policymakers agree that both the rising cost of college and the existing volume of loans need to be addressed. They acknowledge that surging student debt is harming younger generations of students by preventing them from reaching their financial goals while exacerbating racial inequality.
Due to escalating tuition and easy credit, the U.S. has 101 people who owe at least $1 million in federal student loans, according to the Education Department.
Student loan debt in excess of $100K can cause you to pay thousands in interest charges, and your monthly payments can take up a substantial amount of your cash flow. However, there are ways to make your payments more manageable and even accelerate repayment.
Where is college free in the world?
| Country | Tuition (International) |
|---|---|
| Germany | Free |
| Greece | EU-dependent |
| Iceland | Free |
| India | Nominal fees |
| Debt type | Average balance (2023, Q3) | Total Balance (2023, Q4) |
|---|---|---|
| Mortgage debt (Excluding HELOCs) | $244,498 | $12.25 trillion |
| HELOCs | $42,139 | $360 billion |
| Auto loan | $23,792 | $1.61 trillion |
| Credit card debt | $6,501 | $1.13 trillion |
With President George H.W. Bush's signature on the Credit Reform Act, all government loan programs—whether guarantees of commercial loans, or loans made directly from a federal agency—had to account for their full long-term expenses and income.
Before President Biden took office, only 7,000 people ever received debt relief through PSLF. After fixing the program, the Biden-Harris Administration has now cancelled student loan debt for nearly 800,000 public service workers.
Increased demand for a college education, less funding from state governments and increases in administrative and operating costs have contributed to a higher cost. Students can afford college by seeking funding sources such as scholarships, student loans and work-study to help foot the bill.
