One in five adult Americans carry student loan debt. The issue returned to the headlines this week, when Democratic presidential candidate Sen. Elizabeth Warren of Massachusetts proposed canceling this debt for more than 40 million Americans. Here's a look at the landscape.
As many as 44.7 million Americans have student loan debt, according to a 2018 report by the Federal Reserve Bank of New York. The total amount of student loan debt is $1.47 trillion as of the end of 2018 — more than credit cards or auto loans.
Most Americans with student debt are young. But adults 60 and older — who either struggled to pay off their own loans or took on debt for their children or grandchildren — are the fastest-growing age cohort among student loan borrowers.
Persis Yu, an attorney at the nonprofit National Consumer Law Center, said seniors are a sizable portion of the clients she sees. "The number of seniors with student loan debt has exploded," Yu said. "We're not just talking about kids and millennials. It impacts a large swath of our population."
More than three out of four borrowers owe less than $50,000. The Warren proposal would wipe out the first $50,000 of debt of anyone with a household income below $100,000 a year.
The average monthly student loan payment ranges from $200 to $300, according to a report from the Federal Reserve. Many borrowers struggle to repay their loans. The national default rate, a U.S. Department of Education measurement of the number of borrowers who start repayment, then default in the next two to three years, was 10.8 percent among those who started repayment in 2015, the most recent data available.
Experts say that borrowers with low balances are the most likely to default.
“A lot of it has to do with the level of education,” Yu said. “You may have taken out some debt to go to college but for whatever reason, you didn't finish. So you have the burden but you don't have the value of that credential to allow you to earn as much as you need.”
"We don't really have a student loan debt crisis. We have a college completion crisis," Mark Kantrowitz, publisher of SavingForCollege.com, said. "The people who drop out of college are the ones who are defaulting on their loans."
Defaulting has serious consequences.
“Most of the borrowers we see are in default on their loans,” Yu said. “Most have never heard of income-based repayments. Their wages were garnished, their tax refunds were taken.”
For borrowers who can't afford to make their regular payment, the government offers payment plans that are tied to their household income. However, fewer than 20 percent of borrowers participate in these plans.
Yu, whose clients usually come to her after defaulting on loans, says income-based repayment plans help reduce defaults. But the process of enrolling is difficult, with paperwork that can get lost, renewal notices that aren't clear and requirements that vary from lender to lender.
"For a family on SNAP benefits, the bureaucratic nightmare of trying to get into an income-based repayment plan is not something they need," Yu said, referring to the Supplemental Nutrition Assistance Program for low-income individuals and families.
Of the more than 1.3 million people who applied to an income-based repayment plan during the Department of Education’s 2018 fiscal year, almost three-quarters earned less than $100,000, making them eligible for the full amount of loan cancellation under the proposed Warren plan.