5 Surprising Facts About Your Student Loans

These 5 facts about your student loans may come as a surprise.

Here’s what you need to know.

Student Loans: 5 Surprising Facts

New research from Brookings shows some surprising data about student loan debt, which according to the latest student loan debt statistics, affects more than 44 million borrowers who collectively owe $1.6 trillion in student loan debt.

According to Brookings, here are 5 surprising facts about your student loans:

1. 6% of borrowers owe a third of all outstanding student loan debt

According to Brookings, only 6% of borrowers owe more than $100,000 in student loan debt. Only 2% owe more than $200,000. About 18% of borrowers owe less than $5,000 in student loan debt, which represents 1% of all student loan debt.

2. 26% of borrowers owe about 50% of all outstanding student loan debt – and it’s for graduate school.

Graduate school student loan debt accounts for approximately 48% of all outstanding student loan debt. Approximately 24% of all student loan debt is held by borrowers without a bachelor’s degree.

3. Borrowers who owe the most student loan debt are not the ones who default.

This sounds counter-intuitive, but borrowers who owe the most student loan debt are not the ones who typically default. Students at for-profit colleges have the highest defaults. For example, about 40% of borrowers from two-year for-profit programs and 32% of borrowers from four-year for-profit programs default on their student loans within five years of entering repayment.

4. Most college students graduate with little to no debt.

Here’s the breakdown of student loan debt and college graduates:

• 30% of those with a bachelor’s degree graduate with no student loan debt
• 23% graduate with less than $20,000 of student loan debt
• 18% of all borrowers owe more than $40,000
• 48% of all for-profit borrowers owe more than $40,000 compared with 12% who attended four-year public colleges

5. Many students borrow for living expenses.

Paying for tuition is half the battle. Many students also need to borrow for living expenses while attending school. For example, 22% of students at public universities and colleges borrow at least $30,000 for living expenses.

How To Pay Off Student Loans

If some of these student loan facts surprised you, then you’re not alone.

Here’s a helpful framework to pay off student loans.

1. Refinance student loans

When it comes to student loan repayment, the best way to pay off student loans faster is to refinance student loans. Student loan refinancing rates have dropped significantly and are now among the lowest in recent memory.

Here’s an example of how much money you could save with this student loan refinance calculator. Let’s assume that you have student loans at a 9% weighted average interest rate payable over 10 years, strong credit and income, and you can refinance those student loans with a private lender at 3%. If you have $50,000 of student loans, you could save $151 each month and $18,069 total.

2. Consolidate student loans

Federal student loan consolidation enables you to combine your existing federal student loans into a single Direct Consolidation Loan. However, unlike student loan refinancing, federal student loan consolidation does not lower your interest rate or monthly payment. With a Direct Consolidation Loan, your interest rate is equal to a weighted average of your existing federal student loans, rounded up to the nearest 1/8%. So, your interest rate does not decrease, but may slightly increase.

3. Enroll in an income-driven repayment plan

Income-driven repayment plans such as PAYE, REPAYE and IBR are available for federal student loans (not private student loans) and are offered by the federal government. Your monthly payment is based on a percentage of your discretionary income, and the percentage may vary based on the income-driven repayment plan you choose. You also can receive student loan forgiveness, but you may owe income taxes on the amount forgiven.

4. Seek student loan forgiveness

The Public Service Loan Forgiveness program is a federal program that forgives federal student loans for borrowers who are employed full-time (more than 30 hours per week) in an eligible federal, state or local public service job or 501(c)(3) nonprofit job who make 120 eligible on-time payments over ten years. Unlike income-driven repayment plans, the amount forgiven through the public service loan forgiveness program is not subject to income tax.

Here is a recap:

1. Student loan refinancing = save money, pay off student loans faster
2. Federal consolidation = same interest rate, organize your student loans
3. Income-driven repayment = lower monthly payment, student loan forgiveness
4. Public service loan forgiveness = lower monthly payment, student loan forgiveness