Since president Joe Biden’s Administration announced that they are designing a bill to minimize or maybe wipe out Student Debt, the topic is again leading conversations everywhere.
We still are in a very early stage of that plausible debt relief policy, but in the meantime, let’s check recent statics about this phenomenon that impacts a large part of the Americans.
According to educationdata.org, $1.73 trillion is the global amount owed in this type of loan. As a reference, and to put things into perspective, this amount is higher than the annual GDP of 46 states and DC. Only California, Texas, New York, and Florida are over this mark.
Nationwide, there are 43.2 million student borrowers, 13.16% of the US population, and where 20.7% of those are over 18 years old.
For obtaining a bachelor’s degree from a public university, a student borrows around $30,000, but the average debt is almost $40,000.
Until now, numbers seem to reflect only a personal reality, but the truth is that a Student Loan usually has incidence beyond the borrower. Recent statistics published by nerdwallet.com report that $57,520 is the average debt owed by an American household.
When it comes to parents’ debt, they are carrying out $103.6 billion in debt as an outcome becuase they took the chance to help their children by using a federal student loan option.
How do student loans impact my credit score?
Like any other loan, a student debt follows the same principle for credit bureaus analysis. Therefore, the impact depends on how a given person manages their debt.
In general, a credit score is the result of an algorithm that takes the following variables as the source to do the math:
- Payment history (35%)
- Amounts owed (credit utilization ratio) (30%)
- Credit history length (15%)
- Credit mix (10%)
- New credit (10)
Paying on time (even the minimal) and keeping a credit utilization rate at low levels will help any student loans debtor keep that score at least into the fair zone.
However, this is no an easy task. According to reports, among under 40 years old student borrowers, 3.3 of them are behind their payments.
There are more downsides. 53% of the millennial said they hadn’t bought a home because of the impact of their student loan, and 52% believe that taking the loan didn’t worth it.