Since the COVID-19 (coronavirus pandemic) began in March 2020, the US Department of Education announced a temporary pause on student loan repayments.
The pause was extended twice, with the repayment currently expected to start on August 31, 2022. As of the first quarter of 2022, total student debt reached $1.8 trillion, accounting for 7.2% of US GDP.
Rapidly expanding student debt has led to some public concerns, fueled in part by the coronavirus pandemic.
In response, the Biden administration has actively discussed the possibility of canceling a portion of the student debt. Alfabank-Adres takes a look at the student debt owed across various groups and segments.
Total student debt by the type of loan
Based on data provided by the Federal Reserve and the National Center for Education Statistics, private student loans represented 8.8% of all US student loans in the first quarter of 2022.
Private loans are made by banks and credit unions and are typically less attractive than federal loans. Federal loans represent an estimated 91.2% of all student loans.
Within federal loans, Stafford loans accounted for 53.1%, followed by Parent PLUS loans (6.5%) and Grad PLUS loans (5.6%).
While Grad PLUS loans account for a small share of federal loans, the average debt per Grad PLUS loan borrower is the highest, at $56,625 per person. In contrast, the average debt per Stafford loan was $24,880 during the same period.
Federal student debt by the type of institution
Public nonprofit institutions accounted for 44.0% of the federal student debt in the first quarter of 2022, according to the US Department of Education.
The second-largest segment was private nonprofit institutions (34.5%), followed by for-profit institutions (17.3%), foreign and other institutions (4.3%).
The high share of debt owed by individuals attending public institutions is explained by the high enrollment in public colleges. Public institutions are estimated to represent 74.3% of all enrollment in 2022.
At the same time, individuals attending public institutions owed $27,893 in student debt on average in the first quarter of 2022 as compared to $40,358 for those who attended private schools. Higher tuition rates largely explain the higher debt level at private institutions.
Federal student debt by state
The distribution of student debt across states is closely correlated with each state’s population.
The US Department of Education estimates that the size of the federal student debt in California was $141.8 billion in December 2021, which is substantially above the average of $29.7 billion across all states during the same period (latest data available).
However, the average debt per borrower in California totaled $37,756, which is close to the national average. Among states that topped the list with the highest debt per borrower were Washington, DC, ($54,945), Maryland ($42,860) and Georgia ($41,639).
The states or territories with the lowest debt per borrower in 2021 include Puerto Rico ($28,242), North Dakota ($28,604) and Iowa (30,464). The size of the debt in each state depends on the level of state-level assistance to higher education and the cost of attendance.
Is growing student debt a problem?
The current size of student debt is massive; however, the size of student debt must be analyzed in the context of other factors, such as:
- The return on investment
- The importance of education to economic growth
- The default rate
- The size of general government debt
In the short term, the biggest threat to student debt is a potential increase in the delinquency rate once the forbearance relief expires in August 2022.
However, an article published by the New York Fed indicates that the delinquency rate will likely stay below or at the same level as before the pandemic once the repayment begins in August.
In the long term, the major threat to the student loan debt is represented by the growing national debt overall and any further increases in the default rate.
