Student Loan Debt: Top 1 Percent Of Borrowers Owe More Than $150,000 In Loans

Here's one case where it doesn't pay to be in the 1 percent.

Student loans.

The average person who has student loan debt owes $12,800. But 1 percent of those with outstanding loans owe a staggering $150,000+ in debt, according to data from the Federal Reserve Bank of New York released in early March. (H/t The Atlantic).

To pay off that much debt, you have to earn at least six figures. It would take a salary of at least $207,000 per year in order to pay off $150,000 in 10 years; $137,000 per year to pay off the loan in 20 years; $117,000 per year to pay off the loan in 30 years; or $109,000 per year to pay off the loan in 40 years, according to the FinAid calculator.

For comparison, the average starting salary for college graduates is $41,701 per year, according to the National Association of Colleges and Employers.

The top 1 percent of student loan borrowers may have been overoptimistic when taking out their loans. Nearly two in three student borrowers were surprised by some of the terms of their student loans, according to a recent study by Young Invincibles.

Many student borrowers are struggling to make payments. Twenty-seven percent of all student borrowers have a past due balance, according to the New York Fed.

These massive debts often are a result of going to graduate school, which accumulate when students take out loans from private lenders. Eleven percent of graduate students took out private loans in 2007-2008, and 14 percent of undergraduates took out private loans, according to a recent study by the Department of Education. The Consumer Financial Protection Bureau wrote in a press release earlier this month that they anticipate complaints from private student loan borrowers including "difficulties making full repayment, confusing advertising or marketing terms, billing disputes, deferment and forbearance issues, and debt collection and credit reporting problems."

Total student loan debt now exceeds $1 trillion, according to the Consumer Financial Protection Bureau. That exceeds total credit card debt, according to the bureau.

Update: This article has been updated to include statistics on private loans.

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Comments

[JD Painterguy]

09:11 PM on 04/08/2012

"Not Responsible" for my Student Loan Debt

You can read more about that statement at my blog: www.esqpainting.blogspot.com

[genfair]

09:31 PM on 03/31/2012

Both borrower and lender are at fault with the unhealthy levels of student loan debt. BUT, I put more responsibility on the sophisticated parties (the financial services people and the school administrators who profit from the "we get paid now, you the student get paid, maybe, later" arrangement). The less sophisticated parties, young students and their hopeful families have been told for decades that "education is a good investment". And, of course, the most innocent party, the U.S. taxpayer, is the one the ends up holding the bag for much of this. Moral hazard is real folks, and the third party (taxpayer) subsidies that are funneled through the financiers and the service providers, rather than directly to the supposed beneficiaries, have proven disastrous in the health care market, the housing market, and the education market. We're all tied in knots about how to liquidate the crushing debt overhang on consumers and government and it severely erodes the trust required for a democratic republic to function.

[pistol13]

04:37 PM on 03/28/2012

I don't care how much they have to earn to pay back the loan. They must pay it back. For too long the government has let these people off the hook. I have 2 daughters that are still paying back their loan. Seem like I must have raised them wrong by instilling in them a sense of responsibility. They sure would be a lot better off financially if they kissed off that debt.

[martiniandabotoxchaser]

06:35 PM on 03/27/2012

Many of the big loans go to people for graduate and professional schools like medical school, law school and business school....those folks used to not have any problem paying off massive loans...not exactly true anymore.

[DrewMill73]

11:50 AM on 03/27/2012

Here is the real problem: The set up. People want to blame the young students making a bad decision. However, they were taught to believe in themselves (and often encouraged by elders that education is an investment). Regardless, the set up has students SIGNING THEIR LIVES AWAY. There is no recovery from this mistake. There is no bankruptcy. No debt discharge. You are screwed for life if it doesn't work out. What other debt in the world has this kind of leverage? You buy too much house? Foreclosure. Imagine if you had to pay the rest of your life on your mistake? Loans are supposed to be about risk on the part of both the banker and the debtor. Not just a young aspiring loanee. For these 1% quite honestly, you are taking well educated citizens and turning them very much into indentured servants.

[jwalter]

10:08 AM on 03/27/2012

$150,000 worth of education and still dumb as a rock!

[martiniandabotoxchaser]

06:37 PM on 03/27/2012

HUH....it is not out of the question for a student who attends an undergraduate then medical school program to accumulate that much debt...dumb?

[r3000]

09:56 AM on 03/28/2012

What? That's one percent of the students who take loans. Most likely loans in that category are going to med students. So you're saying what?

[Julia Bailey]

10:16 AM on 03/29/2012

That they aren't very smart. Or at least can't do math. As the article points out, debt that size require $207,000 a year salary to pay off. You don't make that much out of med school. Residencies typically start at $50,000/year currently. This is public knowledge, it can easily be obtained before someone takes out that much in loans.

[Ruhrgebietsvermessung]

09:46 AM on 03/27/2012

I have completed my Bachelor Degree a few years ago, then went to work. Now I have some savings and will pursue my Master and maybe PhD. Needless to say that here in Germany I haven't student debt. I needed to work on the side for my living expenses, but the actual costs for studying are 500 € per semester.
Do American students also work on the side for living expenses AND have student debt for the university costs or are the living expenses included in the debt?

[Nathan V]

07:40 PM on 03/27/2012

Cost of attendance (CoA) for schools includes living expenses. However, this assumes a very low rent and only $100/week for spending.

Most student debt is purely for tuition taken in the form of loans and most students carry a job on the side for basic living expenses. In Illinois, average tuition is $10,000 per year. Assume nothing but loans for that cost and you have $40,000 for a Bachelor's Degree, living expenses not included.

With time constraints between job, social life, and work, it is no wonder graduated students are performing low. Where was the time to study?

[bullthull]

12:29 PM on 03/29/2012

Yes we have a system that costs far more, but we also have far more schools, even if you graduated from high school with very poor grades and wait one year you can go to college on loans and or grants
For the best and brightest there are scholarships and grants that make even advanced degrees vurtually free

[glitterik]

08:29 AM on 03/27/2012

The only viable choice these students have is to take their education and degrees and leave the country for Europe or Latin America. It would be easier and faster to learn another language than pay back these ridiculous loans. Move to Europe, where health care and college and child care are free.

[Julia Bailey]

10:17 AM on 03/29/2012

Most countries don't want people who flake on debt.

[Duff Bailey]

06:04 AM on 03/27/2012

What's really needed is some mandatory credit education for students - coupled with real work experiences (not make work "internships") that help them learn what they really want to do and see, first hand, how people in their field make a living - and live - 10, 20 years out. After that, if you decide to borrow 100 K to pursue an English degree and do so, knowing that your debt will hang over you as long as it is unpaid, you've made a free and informed choice.

Also needed are significant subsidies for those who pursue socially needed degrees - some of this support - like the forbearance of student loans for those who teach in low income areas, is already in place - more is needed.

It is absolutely absurd for us to be raising a generation of young adults for whom our society does not provide enough jobs and force them to drown in debt.

[No Unkindness to Bears]

01:58 AM on 03/27/2012

These comments are disgusting! Rather than deeming education worthless, or blaming the student and parents decision to incur debt, we should be tackling the real issue: the skyrocketing cost of exploited college tuition. Tuition should be a FRACTION of its current price. It's neither professor salaries, or the rise in student population that is to blame. This problem is directly connected to trustee boards and school administrators who's greed has now cost this country a trillion dollars.

Money shouldn't be a factor in education. If you make great grades then you should be rewarded by enrolling into a great institution. Likewise, if a college excels in a particular field a student is interested toward, then why should money stop one from pursuing his or her dreams? Students should strive to be their best, and for the best schools. Sadly, the cheapest is rarely the best, and the expensive is usually much better, but the latter is unnecessarily expensive, and the disparity between the two is the crux of the problem at hand.

It's not hard to figure out why school tuition has risen astronomically in the last 30 years. It's dollars signs to those who cash the student loan checks, and its interest is a highly profitable debt security. Higher education and federal loans were not constructed to be profitable in the way they are today. Our current predicament is a testament to this unfortunate crime.

[sanfran55]

09:10 AM on 03/27/2012

Two areas where "for profit" had been a disaster: Healthcare and Education. Greed has taken over, and it's killing the average person. Disgraceful.

[jwalter]

10:10 AM on 03/27/2012

If by "for profit" you mean getting fat off government subsidy. Neither of those industries operate in an even remotely free market.

[reddi27]

01:54 AM on 03/27/2012

I am a financial aid administrator (and my degree is in journalism) so I need to point out that some of the information in this article is incorrect. The article states that "most students can borrow a maximum of $31,000." That is not true. The limit of $31,000 only applies to dependent students (those under the age of 24 who are not married, do not have kids, and are not veterans, etc.), pursuing undergraduate degrees, and whose parents are approved for parent PLUS loans. For dependent students whose parents are denied for PLUS loans and for independent students (everyone over age 24, married, supporting kids, veterans, etc.) the maximum for undergraduate work is actually $57,500. Because this is the maximum for undergraduate work, that means that anyone who has more than $57,500 in federal student loan debt has pursued a graduate degree (this includes master's degrees and doctorate degrees). The maximum federal student loans allowed for pursuing a graduate degree is actually $138,500, so people pursuing higher degrees are certainly not limited to taking out private loans. Please HuffPost, I love you, but I expect basic fact-checking.

[KChamps]

09:39 AM on 03/27/2012

I assumed when reading that they were only focused on undergrad debt. So, it's impossible to have over $58k in undergrad debt without borrowing from a private lender. The Atlantic article they linked to (http://www.theatlantic.com/business/archive/2012/03/the-1-of-the-student-debt-crisis-owing-150-000-in-loans/254973/#) only focuses on undergrad debt.

What's scary to think about is all of the graduate debt they're potentially leaving out.

[JD Painterguy]

01:29 AM on 03/27/2012

My student loan debt will grow to 1.5 million dollars over the next 23 years due to compounded interest. It is already quadrupled at 320K and earns 2K a month in interest at a fixed 8.25% interest rate.

[JD Painterguy]

01:54 AM on 03/27/2012

You can read about my Student Loan Horror story if you go to: www.esqpainting.blogspot.com

[jwalter]

10:13 AM on 03/27/2012

I hope you didn't take on all that debt to be a painter.

[JD Painterguy]

08:47 AM on 03/28/2012

@jwalter:

It will help you if you read the law school scamblogs. Go to www.thirdtierreality.blogspot.com

Also read the Law Professor's blog entitled: "Inside The Law School Scam"
at: www.insidethelawschoolscam.blogspot.com

[Mick11x]

10:50 PM on 03/26/2012

For my BS in Management I only took out about $8000 in student loans. I did 2 years at a community college and found a job that would pay %80 for classes while I went part time. I lived in a very tiny cheap apartment that only cost $250 a month, had an inexpensive car, and used work computers and internet when I needed to. Of course, on the other hand I now only make 32,000 a year.

[sashawhat]

01:46 PM on 03/30/2012

I got my BS in Management last year and I only make $28.8 as an accountant. I am currently in grad school for a MACT degree. I have accumulated $49,000 in student loan debt and will probably have $100k when I graduate. Oh well. Here's to hoping the Master of Accounting degree pays off! If not they can have my first born. I probably won't have enough money to have kids anyway.

[Mick11x]

01:25 AM on 03/31/2012

Accounting sounds like a great career path to be on. Good luck, sashawhat.

[TheRoosterman]

10:05 PM on 03/26/2012

A person going to college and getting a degree does not make one intelligent.

[No Unkindness to Bears]

01:23 AM on 03/27/2012

I ain't got no need for all that fancy book learning and smarty-pants professor talk 'round here!

[Maya Victorine]

09:32 PM on 03/26/2012

I love how people think 18 year olds should know better, before they sign thier life away. Do not listen to school counselors or your parents! What we were told was "the responsible thing to do" really isn't!!!!!! Now we know....

[TheRoosterman]

10:14 PM on 03/26/2012

Well at 18 you should be able to "read" a contract and "comprehend" it's ramifications as well as being able to do simple 6th grade "math". 4 years at 40K per year equals 120K and no job when your done. Did you even stop for a moment an think about how you would pay that off?

[ovtomato]

12:00 AM on 03/27/2012

"4 years at 40K per year equals 120K" ?????4x40=160 FAIL !!

[sdgrrl]

12:55 AM on 03/30/2012

She probably did like a lot of 18 year old kids. Like I thought I might be a movie star, or how 50% of Americans think they will really stay married. She went into something expecting the best, with hope and good intentions. Not everything turns out how we thought- especially from the point of view of an 18 year old.

[Christina Belcher]

12:21 AM on 03/27/2012

I actually think a lot of the parents are at fault. Many of my son's friends have parents that cannot stand the idea that their child might start at a community college. It's like driving a luxury vehicle at all cost. Only problem to day is that the economy is so bad that many kids come out of school owing their life away.

My son was in all Honors and AP classes and probably one of only a couple of kids who started at junior college and stayed home. The so called college experience is a bunch of marketing nonsense bought by the same crowd that only shops at Abercombie and carries a Coach bag.

However, we need to value education and kids that are serious about it. It should not cost thousands to attend a state college. This country needs to prioritize things differently. I don't know how we possibly plan to compete with other places that know that.