Over the past 20 years, college costs have grown at over three times the rate of inflation. The result: 70% of college graduates have student debt, with the average borrower owing more than $37,000 at graduation.
College can transform lives, but the growing debt crisis resulting from rising tuition costs, increasing numbers of student borrowers, and surging defaults, makes it financially out of reach for many deserving students. Student debt is a significant burden not only for families but also for our economy. And, it will worsen as the cost of college continues to rise.
The federal student loan portfolio is currently $1.5 trillion and rising.
Approximately 10 million students who attend college receive student loans. Student debt is now the second highest source of household debt – behind mortgage debt – reaching $1.5 trillion in 2019, up six fold from $250 billion only 15 years ago. Without viable alternatives to existing student loan options long-term economic growth will be negatively impacted
The status quo is unsustainable.
There are 43 million borrowers represented in the federal student loan portfolio. A substantial portion of federal loans are in default, late stage delinquency or incur negative amortization ($400 to $500 billion). In addition, there are approximately $120 billion in private student loans. Federal and private student loans are the only consumer loans not dischargeable in bankruptcy. Even retirees have student debt that increasingly results in garnished social security payments.
The student loan system exacerbates inequality and diminishes equal access to opportunity.
According to the American Council on Education's Race and Ethnicity in Higher Education report, student debt is more of a burden for African American students; they are more likely to borrow, take on more debt and struggle to pay it off than their white peers.
46% of African American dependent undergraduate students are from the bottom income quartile—the highest percentage of any racial or ethnic group; 78% of African American students in the 2003-2004 cohort took out loans to finance their education (compared to 57% of their white peers).
On average, the loan balance for African American students is $5,000 more than for students overall.
82% of all African American students in the cohort that began college in 2003-2004 graduate with debt, compared with 68% of white students.
The median amount owed by African American bachelor’s degree recipients 12 years after starting college was 114 percent of the amount borrowed, compared with 47 percent for white graduates, 79 percent for Hispanic graduates, and 80 percent for those from low-income households, as measured by having received a federal Pell Grant.
Student debt also disproportionately burdens women, according to "Deeper in Student Debt: Women and Student Loans," a report from the The American Association of University Women (AAUW). Women hold nearly two-thirds of outstanding student loan debt in the U.S., at nearly $929 billion, and a disproportionate number of these borrowers are women of color.
The average cumulative debt for women graduating with a bachelor's degree is $21,619 versus $18,880 for men. Plus, women take about two years longer than men to repay student loans with black and Hispanic women paying off student loan debt even more slowly.
From the moment women graduate from college, they face a gender pay gap. Women graduates are paid 74% of male graduates’ earnings.