Biden’s $1.75 Trillion Student-Debt Problem by the Numbers

(Bloomberg) — President Joe Biden is considering forgiving at least $10,000 in student loans per borrower, a promise he made on the campaign trail, through executive action.

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Here are key data points:

$1.75 trillion — the total amount of outstanding student-loan debt in U.S., according to the Federal Reserve. About 92% of that debt — more than $1.6 trillion — is in the hands of the federal government. Put another way, student-loan debt equals about 6.5% of U.S. gross domestic product.

43.4 million — the number of borrowers with federal student-loan debt, according to the Education Data Initiative.
$37,113 — the average balance for borrowers of federal student loans. Including private debt, the number jumps to $40,904.

Four — the number of months Biden has to make a decision. The moratorium on student-loan payments is set to expire on Aug. 31, and the president has said he intends to either extend the moratorium or do some sort of debt cancellation before that date. The deadline leaves just over two months until November’s midterm elections that will decide which party controls Congress.
41% — Biden’s approval rating among Americans aged 18 to 29, according to the Harvard Institute of Politics youth poll released Monday. His approval rating is down 18 percentage points from a year ago, according to the poll. The top reason cited for dismay was his “ineffectiveness.” Young Americans are likely to be a decisive voting bloc in the midterms. Harvard’s poll found that with more than six months until the election, youth turnout is expected to match the historically high turnout seen in the last midterm cycle: 36% said they will “definitely” vote; 37% said so at this point in 2018.
34% — adults aged 18 to 29 who have student-loan debt, according to the Education Data Initiative.

85% — young Americans, regardless of party, who favor some sort of government action on student debt, according to the Harvard poll; 38% favor total debt cancellation. Only 13% believe the government should not take any action on it. Among young Americans who are not currently enrolled in college and without a degree, support for government action is 79%.
$22,690 to $39,150 — the average cost of attendance for full-time in-state and out-of-state undergraduate students at public four-year institutions, according to the College Board. The average cost of private non-profit four-year universities is $51,690.
$52,000 — the average student debt owed by Black bachelor’s-degree holders. By race, Black college graduates owe considerably more than others on average. Four years after graduation, almost half owe an average of 12.5% more than they borrowed, according to the Education Data Initiative.

Proponents of a broad cancellation include prominent Democrats, President Barack Obama’s former education secretary and a former official in the Trump administration’s education department. Biden has said he is not considering forgiving $50,000 worth of debt for every borrower.

A recent analysis by the Federal Reserve Bank of St. Louis found that rates of missed payments on student loans are at risk of climbing when the forbearance ends.

“Serious delinquency rates for student debt could snap back from historic lows to their previous highs in which 10% or more of the debt was past due,” Lowell Ricketts, a data scientist for the Institute for Economic Equity at the St. Louis Fed, said in the post.

Interest rates for federal student loans vary depending on the loan type and generally are set in May for loans disbursed from July to same month of the following year, according to the Department of Education’s Federal Student Aid office.

Students currently pay 3.73% for the most limited subsidized loans, to 5.28% for unsubsidized loans. Unlike other forms of debt, such as credit cards and mortgages, the loans are daily interest loans, which means that interest accumulates daily. Parents of students and graduate students pay 6.28%. This raises the outstanding amount due on the loan and interest is then charged on that higher principal balance, increasing the overall cost of the loan.

Most federal student loans also have an origination fee that is a percentage of the total loan amount. This fee is deducted from each loan that is disbursed. This means the money received will be less than the amount the student actually borrowed and is charged interest on.

The interest rates on federal student loans is set by federal law by using the May 10-year Treasury note auction and adding 2.05 percentage points to 4.6 percentage points based on the loan type.