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Let’s be real—the student loan crisis in this country has become way too serious to ignore. Right now, the total amount of federal student loan debt in the U.S. is over $1.57 trillion.1 That’s insane.
Let’s take a look at the simple (but painful) facts so we can understand the problem and work toward getting student loans out of our lives for good.
The Stats on the Student Loan Crisis
- At this point, federal student loan debt has way exceeded national credit card debt—by over $780 billion!2
- Student loan debt has seen an almost 157% growth since the Great Recession of 2008 and is the fastest-growing portion of total household debt in the U.S.3
- There are currently about 45 million student loan borrowers in this country.4
- Sixty-two percent of students graduate with student loan debt in 2019.5
- The average student loan debt is about $38,792.6
Still breathing after reading those facts? Good. Because we’re not done breaking down just how crazy student loans really are (more on that later).
The History of Student Loan Debt
Believe it or not, student loans haven’t been around forever. They actually started in 1957 mostly to encourage more students (especially those in the fields of science, math and foreign languages) to attend college so Americans could beat out Russians during the Space Race. And it worked. College student attendance shot up from 3.6 million in 1960 to 7.5 million in 1970.7
OUT NOW! Watch Borrowed Future on Amazon Prime Video, AppleTV and Google Play.
Know what else shot up? Student loan debt.
You might blame the crazy rise in tuition costs (up 134% from 50 years ago!) or the surge in inflation over time or all pressures from society to get a college degree—but you can’t argue with the numbers.8 And student loan debt doesn’t look like it’ll slow down anytime soon.
Student Loan Debt Totals by Age
People sometimes think student loan debt is just a young-person problem. But that’s 100% false. If you’re reading this and have been paying on your loans for years, you know what we’re talking about. Some people are still paying on their student loans when their own kids are heading off to college. It’s crazy!
Just check this out if you don’t believe it. Here’s a breakdown of American student loan debt totals by age:9
| Age Range | Total Student Loan Debt |
| 18–24 | $114 billion |
| 25–34 | $501 billion |
| 35–49 | $613 billion |
| 50–61 | $274 billion |
| 62+ | $93 billion |
The group carrying the most debt is that 35–49 range. Those aren’t kids who are fresh out of college. That’s the crowd that’s sending their own kid off to college while still paying on their own student loans.
And look at the 62+ range—they’ve got $93 billion in student loan debt! Maybe it’s debt from their own degree or maybe it’s what they borrowed to put their kids through school. Either way, it’s not okay. Those are supposed to be your golden years. Retirees shouldn’t have to struggle with student loan debt.
The Economic Impact of Student Loan Debt
Crazy enough, having piles of student loan debt makes millennials less likely to be able to afford things like houses and families. Go figure.
Research from Ramsey Solutions also showed that nearly half (47%) of those who used student loans to pay for school are putting off other big life moments—like buying a home, getting married, or having kids—because of their student loan debt.
It’s pretty simple: When people have to put a huge chunk of their income toward paying their student loan debt, they have less money to spend on other things.
The True Cost of Your Student Loan Monthly Payments
There’s a reason why lenders make it pretty easy and painless to take out a loan. They know people (especially high school and college-age ones) just want to take the next step in their lives and will be drawn to the fact that student loans make college seem affordable. But really, the cost of the loan is so much more than we see on the surface. Watch our new documentary Borrowed Future for even more about the truth behind student loans.
Picture it: You’re young, so you take out student loans to major in something you’re passionate about. You’re hopeful about the future. But then, after graduating, you discover you have to make monthly payments on those loans for years—like 21 years (that’s the average time it takes people to pay them back).10
That’s a lot of life to spend being weighed down by debt.
How Are Monthly Payments Calculated?
The average monthly payment on a student loan is $393.11 But how do loan companies come up with your monthly payment anyway?
That not-so-magic number is based on things like the total loan amount, interest rate, number of years it takes to pay the thing off, and any other requirements the lender of that loan might tack on (some lenders have a required minimum monthly payment).
Let’s look at some averages and then some examples of how they affect your total payoff amount in the real world.
| Average Student Loan Debt Per Borrower | $38,79212 |
| Average Student Loan Interest Rate | 5.8%13 |
| Average Time It Takes to Pay Off Student Loans | 21 years14 |
| Average Student Loan Monthly Payment | $39315 |
Don’t want to crunch the numbers on a yellow notepad? Good news—you don’t have to! Just pop these numbers into our Student Loan Payoff Calculator. If you’ve got $38,792 total debt at a 5.8% interest rate and you’re making a $393 payment each month, you’ll have that loan holding you down for 11 years.
But wait, the numbers get worse (oh, great). Because at the end of those 11 years, you’ll have paid $14,052.09 in interest alone. That’s right, your $38,792 loan will actually cost you $52,844.09 when it’s all said and done. Ouch.
And most college grads aren’t raking in the dough either. Recent college grads earn an average salary of $53,889.16 That means they’re bringing home roughly $3,400 a month (after taxes). So, a $393 student loan payment will eat up around 11% of their monthly take-home pay!
But what would happen if those payments didn’t exist? What could that money do? Okay, for this example, let’s run some numbers through our Investment and Retirement Calculator. Let’s say a 21-year-old graduate started investing that $393 every month with a 10% return instead of putting that money toward a student loan payment. They’d have over $4.5 million by the time they retire at the age of 67.
Don’t even get us started on what you could do with that kind of money. Talk about living and giving like no one else!
What About Refinancing Student Loans?
Now that student loan relief is ending, you might be thinking about refinancing those suckers. Student loan refinancing might sound like a quick and easy fix, but let’s face it, quick and easy is what gets folks into student loan debt in the first place. If you’re not careful, you could end up with a higher interest rate or longer payment terms than you had before.
So, before you decide refinancing your student loans is the winning lottery ticket you’ve been waiting for, let’s get clear on a few things.
With refinancing, you’re basically asking a bank or private company to take all your student loans, pay them off, and give you a new interest rate and payment terms. They fronted you the money, so now you owe them.
Student loan refinancing is the only type of debt consolidation that we recommend. But it isn’t for everyone. You can dig into this some more in our Quick Read Destroy Your Student Loan Debt, but here’s a short checklist. You should only refinance your student loans if:
- It won’t cost you anything to consolidate them.
- You can replace your variable interest rate with a lower, fixed interest rate.
- Your new net interest rate is lower than your current net interest rate.
- You don’t sign up for a longer repayment period.
- You don’t get so relieved by the thought of a single payment that you lose your motivation to pay off your debt fast!
That last one is key. You don’t want to do anything that gets you so comfortable with your debt that you stop trying to pay it off quicker.
Why Do People Rely on Student Loans?
Now that we’ve seen the hard facts of student loans, let’s look at the thinking (or lack of thinking) behind getting one.
Right now, there’s a mindset in this country that if you don’t get a degree, you can’t win. You can’t get a well-paying job. You can’t be successful. You can’t be happy. So it’s no wonder that high school students are freaking out, thinking they won’t get a decent job if they don’t have a degree. And they’ve been fed the lie that the only way to afford their college degree is to take out a loan.
But neither of those ideas are true. Plenty of people who never went to college have “made it” with plain ol’ hard work. There are lots of opportunities out there to make good money without getting a college degree. So let’s just go ahead and bust that myth right there.
Still, sometimes you definitely need a degree to go into the field you want. But just remember: A degree is a degree no matter where it’s from—it’s 100% possible to get a degree without loans by picking a cheaper school. And if that means you choose a community college, who cares. Seriously—10 years later, it won’t even matter.
The truth is, while student loans are meant to make life easier for students, they do the exact opposite and create bad money habits that students take with them throughout life. Because once you’ve signed up for $80,000 in student loans—what’s the big deal when it comes to credit card debt, right?
The negative effects of student loan debt aren’t just financial either. In our own research at Ramsey Solutions, we found that 53% of those who took out student loans say they regret it. And 43% of those who took out student loans regret going to college altogether. That’s a lot of regret, people. And living in regret isn’t emotionally healthy for anyone.
But that’s not the only effect people deal with. Our research goes on to show that Americans with consumer debt (like student loans) are nearly twice as likely to lose sleep over their personal finances than those without. On top of that, 54% of Americans with consumer debt worry daily about money.
Listen: Higher education is great and all, but taking out a loan isn’t the only option to get that education. Not only does student loan debt weigh you down future (and stress you out), it impacts the future of our country—big time.
Are Universities Fueling the Student Loan Crisis?
All right, let’s be clear here. We’re not saying that every university is adding to the problem, but it’s no secret that college tuition isn’t getting any cheaper. The cost of getting your degree has tripled in the last 20 years, and it keeps on rising. Private universities are especially pricey—with students spending an average of over $54,000 for the 2020–21 school year!17
Income Share Agreements: The Misleading “Alternative” to Student Loans
Rising tuition costs are bad enough, but have you heard about income share agreements? That’s a contract between a college and a student where the school loans money to the student to cover education costs (like an “I owe you”). The student agrees to pay a percentage of their income back to the school later on down the road. But whenever their income increases, their monthly payment increases too.
Some people think this is better than a student loan, but is it really? Truth is, students who do this are still in debt because they borrowed money—and they’ll have to keep making payments for years. Just sounds like another way to soften the look of something that’s still debt.
Nobody wants to graduate from college, get an exciting new job with a nice salary, and then face the fact that thousands of dollars of that salary will be going right back to their college. What a bummer. Instead, look at things like scholarships, tuition reimbursement programs, and part-time jobs to help your student fund college.
How to Get Yourself Out of Student Loan Debt
If you’re in the middle of this student loan crisis—carrying that debt around and handing over a chunk of every month’s income to slowly dig your way out—there is hope! You don’t have to stay here forever.
You can get yourself out of student loan debt for good. And you don’t have to wait around for some long-shot promise of student loan forgiveness from the government either.
You don’t have to do this on your own. Take a class like Financial Peace University where you can learn how to stick with the debt-free grind and pay off your student loans quicker than you ever thought possible. You can try out FPU today (and the premium version of the EveryDollar budgeting app) with a free trial of Ramsey+.
We know the student loan crisis seems too huge to even think about sometimes. That $1.57 trillion number is no joke.18 But that $1.57 isn’t something you have to take down yourself. Focus on how you can get out of the debt you have and teach your children to steer clear of student loans completely.
Don’t let this insane national crisis we have create a personal crisis for you. Make the choice to get out and take the steps to move forward with your life. You’ve got this!
