March 23, 2015
A Snapshot of Student Loan Debt
A growing reliance on federal student loans to finance
increasingly costly postsecondary education expenses has
resulted in borrowers accumulating larger amounts of
student loan debt. By a number of metrics, the debt being
incurred by current borrowers is considerably larger than
amounts incurred by past cohorts. Many borrowers also are
taking advantage of repayment flexibilities that allow them
to extend the period over which they repay their loans, but
which may lead to larger overall amounts paid due to
increased interest expenses. In aggregate terms, the federal
student loan portfolio has grown considerably in recent
years and the outstanding balance of federal student loans
now exceeds $1 trillion—more than a tenfold increase over
the outstanding balance two decades ago.
Total Student Loan Debt, by Type of
Department of Education data show that for students
completing degrees of all types, both the percentage with
federal loan debt and the average cumulative amounts owed
steadily increased over the past two decades (Figure 1).
Figure 1. Average Cumulative Amount Owed on
Federal Student Loans, by Type of Degree Completed
(Thousands of dollars, AY1995-1996 through AY2011-2012)
Doctoral degree recearch/scholarship
Doctoral degreeprofessional practice
100 125 150
Source: U.S. Department of Education, National Postsecondary
Student Aid Studies (NPSAS): 1996, 2000, 2004, 2008, and 2012.
Note: Nominal dollars.
For undergraduate students, average cumulative federal
student loan debt at degree completion more than doubled
between award year (AY) 1995-1996 and AY2011-2012. In
AY1995-1996, 26% of associate degree recipients had
loans and owed an average cumulative total of $6,200; by
AY2011-2012, 42% had loans and owed an average of
$16,300. Among bachelor degree recipients, in AY19951996, 49% had loans and owed an average of $11,900; by
AY2011-2012, 62% had loans and owed an average of
Cumulative student loan debt of graduate and professional
degree recipients has increased even more. (Estimates also
include undergraduate debt.) In AY1995-1996, 44% of
master’s degree recipients had federal student loan debt and
owed an average cumulative total of $17,000; by AY20112012, 59% had loans and the average cumulative amount
owed had increased to $52,100. Among doctoral degree
recipients in research and scholarship fields (e.g., Ph.D.), in
AY1995-1996, 30% had loan debt and the average
cumulative owed was $17,300; by AY2011-2012, 43% had
loans and the average amount owed had increased to
$79,300. The debt of professional practice doctoral degree
recipients (e.g., M.D., J.D.) increased the most starkly. In
AY1996-1996, 74% had loans and owed an average of
$46,600; by AY2011-2012, 78% had debt and owed an
average cumulative total of $133,300.
How Student Loans Are Repaid
Federal student loans are characterized by myriad ways in
which repayment may be structured and temporarily
delayed. Borrowers may select from among several
different loan repayment plans. They also may extend the
repayment term of their loans by including them in a
Consolidation Loan. Additional flexibilities include
deferment and forbearance, which allow borrowers to
temporarily delay making payments on their loans. Use of
these flexibilities, however, may delay or slow the rate of
repayment and may ultimately increase the total amount of
interest borrowers pay on their loans.
Unless a borrower chooses otherwise, student loans are
repaid according to a standard repayment plan, with equal
monthly installments paid over a period of not more than 10
years. Increasingly, borrowers are using the income-driven
repayment plans (income-based repayment (IBR), incomecontingent repayment (ICR), and Pay-As-You-Earn
(PAYE)) in which payment amounts are capped at a portion
of discretionary income and adjusted annually, and in
which the repayment period may be extended up to 20 or 25
years. Under the income-driven plans, any loan balance that
a borrower has been unable to pay by the end of the
specified repayment term is discharged.
Other available repayment plans include graduated
repayment, in which borrowers’ monthly payment amounts
gradually increase over the course of the repayment period;
extended repayment, in which borrowers with total loan
balances that exceed $30,000 may make lower monthly
payments over a longer repayment period; and alternative
repayment plans, which may be made available to
borrowers who demonstrate they are unable to repay
according to the other plans.
www.crs.gov | 7-5700
A Snapshot of Student Loan Debt
Borrowers may simplify the repayment of their federal
student loans by including them in a new Consolidation
Loan. Through loan consolidation, borrowers begin a new
repayment term that—depending on the loan balance—may
be for a period of up to 30 years. This may reduce the
monthly payment amount, but may lead to an increase in
the total amount of interest paid. Consolidation Loans
comprise 35% of the federal student loan portfolio.
Effects of Interest Accrual During Periods When
No or Reduced Payments Are Made
Figure 2. Cumulative Outstanding Direct and
Guaranteed Student Loans
(Billions of dollars, FY1994 to FY2016 est.)
Borrowers are relieved of making payments on their loans
during certain periods, such as while they are in school,
during a six-month post-enrollment grace period, while in
deferment, or when granted forbearance.
For most loans (except need-based Subsidized Loans)
interest begins accruing when a loan is disbursed and
continues to accrue even during periods of delayed or
deferred repayment. While borrowers may delay paying the
interest that accrues during these periods, it is eventually
capitalized (i.e., added to the principal balance). Due to the
accrual and capitalization of unpaid interest following
periods of delayed repayment, many borrowers begin
repayment on their loans owing hundreds or thousands of
dollars more than they initially borrowed.
The income-driven repayment plans permit borrowers to
repay their loans over a period that may exceed 10 years.
Additionally, those borrowers with substantial debt relative
to their incomes may qualify to make monthly payments of
less than even the interest that accrues on their loans. If this
occurs, the unpaid interest continues to accrue and
eventually may be capitalized into the principal balance of
the loan, increasing the total amount owed.
Student Loan Debt in the Aggregate
The federal student loan portfolio has been steadily
increasing due to factors that include growth in the overall
number of borrowers, individuals borrowing larger amounts
to finance their education expenses, and the availability and
use of options to delay or extend loan repayment. More
than 41 million individuals—one in six adult Americans—
currently have federal student loan debt. Since 2010,
student loans have been the nation’s second largest source
of consumer debt, exceeded only by mortgage debt.
During the period from FY1994 through FY2003, the total
volume of student loans outstanding increased from less
than $100 billion to nearly $300 billion (Figure 2). During
this period, federal student loans were disbursed at a rate
that remained under $50 billion per year. From FY2004 to
FY2010, annual disbursements gradually increased from
$50 billion to $100 billion, and since FY2010,
disbursements have remained slightly above $100 billion
per year. The total volume of federal student loans
outstanding surpassed $500 billion in FY2008, and
exceeded $1 trillion in FY2014.
Source: Budget of the United States Government, Fiscal Year 2016
(and prior years), Appendix for the Department of Education.
Congress may consider the following policy issues in the
context of reauthorization of the Higher Education Act of
1965, which authorizes the federal student loan programs.
Loan availability. Should new constraints be established to
limit how much student loan debt individuals may incur or
the extent to which postsecondary education expenses may
be financed with federal student loans?
Loan repayment terms. What are the long-term benefits
and costs to borrowers and society of existing loan
repayment flexibilities such as allowing borrowers to
spread the repayment of their loans over an extended period
of time or to make reduced monthly payments, but which
lead to increased interest expenses?
Debt and societal well-being. To what extent does federal
student loan debt affect borrowers’ opportunities and
choices concerning careers, family formation, home
ownership, and wealth accumulation?
Sustainability of the federal loan portfolio. Although
most loans are repaid and defaulted student loans are in
many cases rehabilitated or collected on, consideration may
be given to the rate at which the federal loan portfolio will
grow over the long term and to the proportion of loans that
will ultimately be repaid in full.
For more information, see CRS Report R40122, Federal
Student Loans Made Under the Federal Family Education
Loan Program and the William D. Ford Federal Direct
Loan Program: Terms and Conditions for Borrowers, by
David P. Smole.
David P. Smole, firstname.lastname@example.org, 7-0624
www.crs.gov | 7-5700