For student borrowers, the last ten years have meant debt — a mountain of it, always growing. According to information services and credit reporting company Experian, student loan debt in the United States has grown more than $833 billion since 2007 to reach $1.4 trillion — an all-time high. The new total represents an astonishing 149% increase in a single decade.
Incredibly, though, while 13.4% of all U.S. consumers have one or more student loans on file — a population spanning from the Silent Generation of pre- and post-World War II to Generation Z, those born in the mid-1990s or later — delinquencies have been falling, Experian found, suggesting that Americans are getting smarter about managing their student debt.
“Student loan balances are on the rise, which is a result of the increasing cost of higher education,” said Experian’s Michele Raneri, vice president of analytics, in a written statement accompanying the company’s latest State of Student Credit report. “Even with this number moving upward, the data is showing a decrease of delinquencies, which means that consumers are managing their loan payments better than they have in the past.
“A student loan is an investment that can benefit someone for a lifetime. Making more-informed decisions is essential for consumers and lenders alike. Lenders need deeper insights into the consumers they are lending to, and consumers — particularly younger borrowers — need a better understanding of how to manage their obligations.”
ON THE MBA FRONT, RISING DEBT IS NO LONGER NEWS
Experian’s report does not break down numbers for business schools, but we know that MBA debt makes up a good chunk of the total. According to a Poets&Quants analysis published in June, students in the Class of 2016 racked up $261,736,988 in debt at the top 10 schools, with the University of Pennsylvania’s Wharton School leading the way (average debt load: $130,446), followed by USC Marshall School of Business ($125,822), MIT Sloan, NYU Stern School of Business ($115,861), Dartmouth College’s Tuck School of Business ($115,340), Northwestern University’s Kellogg School of Management ($111,537), Georgetown University’s McDonough School of Business ($111,316), Duke Fuqua, Columbia Business School ($109,798), and Yale University’s School of Management ($107,339). All have increased in the last five years, some by huge leaps like MIT Sloan, up nearly 30% from $86,688 in 2011.
In all, 14 schools in the top 50 have seen their average student debt burden rise to six figures. In 2011, there were only two schools with debt burdens of $100,000 or greater; in 2016, they range from $130,446 at Wharton to $101,667 at Carnegie Mellon University’s Tepper School of Business.
Wharton has led all schools in debt burden for each of the past four years, its average debt rising 10% from $117,200 in 2012. Whartonites who graduated in 2016 borrowed $49,895,595 to gain that MBA degree. What does that mean for the individual graduate and his or her brand-new MBA? Practically speaking, assuming the standard 6.8% interest rate over 10 years, someone who owes the average from two years at Wharton will pay 120 installments of $1,501, which also covers $49,695 in interest. Of course, that’s generally less of a problem for Whartonites since they make more: The Class of 2016 report median pay packages of $148,892, and better than 98% of grads got job offers.
GENERATION X, 1ST POST-BABY BOOMER GENERATION, OWES THE MOST
Experian found that the average total student loan balance is $34,144, while the average number of student loans is 3.7 per person, up from 2.4 in 2007. The average VantageScore for consumers with one or more student loans is 650 — 25 points lower than the national average of 675. VantageScore is a credit score developed by the three U.S. credit reporting companies: Experian, TransUnion, and Equifax.
The generation with the largest average outstanding balance is Generation X, or those born after the Baby Boomers (roughly from the early 1960s to late 1970s): $39,802. Generation Y (born in the 1980s and 1990s) has the largest number of loans — 4.4 per person — and Generation Z has the highest percentage of loans currently in deferment, 77%. Regionally, Experian found that consumers on the East Coast tend to have higher student loan balances. Gainesville, Florida, has the highest average balance at $42,400, while Glendive, Montana, has the lowest at $20,200.
On the positive front: Overall, the percentage of late payments has dropped 10.1% since 2009.
“In most cases, higher education is worth the investment because student loans pay off in the form of higher income over time. But it’s especially important for young people to understand the terms of their loans,” said Rod Griffin, Experian’s director of public education. “Failure to repay even one of the loans or poor payment behavior could do long-lasting damage to your credit history and scores. Just as the value of your degree is measured over your entire career, how you manage your student loans will impact your financial future.”
See the next page for a set of charts breaking down debt by generation and geographic location.