Words and Money: The Deal with Student Loan Debt with Natalie Bacon — Wander Wealthy (2024)

FAQs

Who suffers the most from student debt? ›

Black and Latino borrowers are disproportionately impacted by student loan debt. Due to racial wealth disparities, most Black and Latino college students come from low-income backgrounds and can count on only a fraction of the financial support.

The federal government fully guarantees almost all student loans. Some student loans are held by agencies like Sallie Mae or a third-party loan servicing company. Federal student loans can include Direct Loans, Perkins Loans, and Federal Family Education Loans. Private companies may own federal loans.

45% of federal borrowers owe less than $20,000 in student loan debt. 10% of borrowers owe more than $100,000. The federal government forgives student loans at a rate of $95.45 per indebted student borrower.

If you withdraw from school, you still have to pay back your loan. If you can't find a job, you are still responsible for paying back your loan. The amount you have to pay back can be more than what you originally borrowed because of accrued interest. See how interest affects your payments.

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).

Across three of the racial and ethnic groups, women had higher shares of debt, 4.2 percentage points higher for white women than white men, 5.2 percentage points higher for Hispanic women than men, and 11.2 percentage points higher for Black women than men.

From 1997 to 2021, the Education Department estimated that payments from federal direct student loans would generate $114 billion for the government. But the GAO found that, as of 2021, the program has actually cost the government an estimated $197 billion.

Federal student loans, which include Direct Subsidized loans, Direct Unsubsidized loans, Direct Consolidation loans, parent PLUS loans, grad PLUS loans, Perkins loans and some Federal Family Education loans, are owned by the U.S. Department of Education.

What is the average credit card debt? The average American household owes $7,951 in credit card debt a year, according to 2022 data from the Federal Reserve Bank of New York and the U.S. Census Bureau.

What percentage of America is debt free? ›

Around 23% of Americans are debt free, according to the most recent data available from the Federal Reserve. That figure factors in every type of debt, from credit card balances and student loans to mortgages, car loans and more.

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.

Carrying student debt can affect your ability to buy a home if your debt-to-income ratio is too high. If you have too much student loan debt, you won't be able to save as much for retirement. Student loan debt can lower your credit score, especially if you fail to make on-time payments.

As of 2023, one out of every 10 Americans has defaulted on a student loan, and 5% of all student loan debt is currently in default. About 4 million student loans enter default each year.

It's perhaps no surprise, then, that 24% of Americans with student loan debt say it's their biggest financial regret, according to a survey from personal finance site Bankrate.

A loan is money you borrow and must pay back with interest. Student loans can come from the federal government, from private sources such as a bank or financial institution, or from other organizations.

Besides aid from the U.S. Department of Education, the federal government offers several financial aid programs. Your state might offer grants or loans to help pay for college. Many schools offer financial aid from their own funds. Many organizations offer grants and scholarships.

History. Federal student loans were first offered in 1958 under the National Defense Education Act (NDEA). They were available only to select categories of students, such as those studying engineering, science, or education. The program was established in response to the Soviet Union's launch of the Sputnik satellite.

Student loans are a financial aid option designed to help cover the costs of higher education expenses. These loans are provided in a lump-sum and are repaid in installments. The debt must be paid back over an agreed timeline, plus interest (and fees, if applicable).