The number of federal student loan borrowers with debts of six figures or more is increasing. In the second quarter of 2024, 2.4 million borrowers had balances between $100,000 and $200,000, compared to 1.8 million in 2017. Furthermore, 1 million individuals had balances exceeding $200,000, up from 600,000 people in the same period. Wayne Johnson, former chief operating officer of the Office of Federal Student Aid, noted that some individuals owe the federal government over $2 million in student loans. The rising trend of large loan balances is concerning and indicative of the increasing cost of higher education.
Several factors have contributed to the surge in borrowers with six-figure student loan debts. Betsy Mayotte, president of The Institute of Student Loan Advisors, attributed the primary reason to the escalating cost of higher education over the years. The annual price tag for some colleges is close to $100,000 when including tuition, fees, room and board, and other expenses. Graduate students, however, bear the largest federal student loan debts as they are not subject to borrowing limits like undergraduate students. This policy has led to schools charging higher prices for graduate programs without much concern for affordability, according to experts.
Graduates of professional programs such as dentistry and veterinary medicine often accumulate significant federal and private student loan debts. More than 10% of graduate and professional students owe $100,000 or more, compared to less than 1% of students in bachelor’s degree programs, as reported by higher education expert Mark Kantrowitz. Dental program graduates carried an average debt of around $307,000 in 2019-2020, while veterinarians were roughly $170,000 in debt. The substantial debts can be major stressors on graduates, with nearly 80% of those owing between $130,000 and $139,000 reporting high or very high levels of stress from their debt.
Apart from graduate students, parents can also incur substantial amounts of debt through Parent Plus loans, which have seen a significant increase in disbursements from 2000 to 2016. The Century Foundation found that annual Parent Plus disbursements tripled from about $5 billion to over $15 billion during that period. Low-income and low-wealth parents who take out these loans to support their children’s higher education are at risk of becoming downwardly mobile due to the burden of debt. This poses serious financial challenges for families seeking to provide opportunities for their children through college education.
The implications of the rising number of borrowers with large student loan debts are far-reaching. The strain of high debt levels can have severe consequences on the financial well-being and mental health of borrowers. The stress associated with managing significant student loan obligations can impact the overall quality of life for individuals, hindering their ability to pursue other financial goals or personal aspirations. Addressing the root causes of escalating student loan debt, such as the soaring costs of higher education and policy loopholes that allow unlimited borrowing, is essential to alleviate the burden on borrowers and prevent future generations from facing similar challenges.
In conclusion, the increase in federal student loan borrowers with six-figure debts reflects the broader issues of rising education costs, unlimited borrowing policies, and the financial strain faced by graduate students and parents. The growing trend of individuals owing significant amounts in student loans underscores the need for comprehensive solutions to address the underlying causes and provide relief to borrowers. By implementing reforms that promote affordability, limit excessive borrowing, and offer support to those burdened by student loan debt, policymakers can help mitigate the financial challenges faced by borrowers and foster a more sustainable and inclusive higher education system.
