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The average debt among undergraduate students with loans in the class of 2019 is $28,950, according to a new report from The Institute of College Access and Success, a nonprofit focused on higher education research and advocacy.
That debt marks a slight decrease from $29,200 for the class of 2018. The percentage of students in the class of 2019 who took out loans also dropped compared with 2018, from 65% to 62%.
Debbie Cochrane, executive vice president of TICAS, says these shifts align with a general flattening of debt levels in recent years, due in part to increased state investment in higher education. But this trend and that funding could end due to the economic effects of COVID-19.
“These students graduated in 2019,” Cochrane says. “We’re now in the middle of an economic and health crisis that puts all those gains in jeopardy.”
Average student debt over time
Average student debt growth has slowed, but indebtedness has increased substantially since TICAS issued its initial report on the subject 15 years ago.
“What’s clear is that despite the flattening in recent years, debt has not been flat in the longer period,” Cochrane says.
In 2004, the average student debt was $18,550 — roughly 56% less than it is for the class of 2019. TICAS says inflation was 36% over the same period of time.
Average debt has increased even faster in some states. For example, TICAS found that debt among graduates in New Jersey has grown 107% since 2004, rising from $16,223 to $33,566.
The pandemic will likely accelerate this growth.
“Students who are still in college or considering college now have frequently seen their family's ability to pay for school change dramatically because of the economic crisis,” Cochrane says.
She says it’s unclear what policymakers will do to support these students.
Managing federal student debt
Relief is available to most federal loan borrowers, as their payments are suspended interest-free through Dec. 31.
But once payments restart, if you owed the average debt of $28,950, your monthly bills would be roughly $300, assuming an interest rate of 4.5% and a 10-year repayment term.
That may be difficult to afford if you’re facing an economic hardship.
You could continue to pause payments, but pay interest for doing so. A better long-term solution is enrolling in an income-driven repayment plan.
“Income-driven plans usually can fit someone’s budget,” says Betsy Mayotte, president and founder of the nonprofit Institute of Student Loan Advisors.
These plans set federal loan payments at a percentage of your discretionary income, typically 10%. Monthly payments can be $0 if you earn below a certain amount.
Options for private loan borrowers
Roughly 16% of graduates in the class of 2019 have nonfederal loans, according to TICAS. If you’re among them, contact your lender immediately if you can’t afford payments.
“I wouldn’t call after your first bill is due,” Mayotte says. “I would call before that and let them know you’re struggling.”
She says you may be able to pause payments or make interest-only payments temporarily. You could also ask your co-signer for help, if you used one.
Another option would be refinancing private loans at a lower rate. But you or a co-signer will need steady income and a credit score in at least the high 600s to qualify.
For example, refinancing $28,950 from 4.5% to 3.5% would reduce your monthly bill by $14 and save you $1,652 over a 10-year term. If you needed more wiggle room in your budget, you could refinance to a 15-year term to lower your payments by $93 — but you’d pay $1,249 more overall as a result.
Use a student loan refinance calculator to help find the right repayment terms for you.
If you have federal student loans, don’t refinance them until at least the payment suspension ends. Refinancing costs you access to that payment pause and other government programs like income-driven plans.