Every year, millions of new students are injected into the student loan system while current borrowers struggle to get out.
This year, the Biden administration’s new student loan forgiveness plan could begin clearing the debts of millions of borrowers as early as this fall — just as incoming freshmen begin accumulating new balances on their path to A degree.
In fact, in 2024, high school graduates heading off to four-year degrees will rely even more on loans, according to a new report.
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These college applicants could take on an average of up to $37,000 in student debt to earn a bachelor’s degree, according to a NerdWallet analysis of data from the National Center for Education Statistics. The analysis was conducted before recent issues with the Free Application for Federal Student Aid.
Once families reach their federal student loan limits, they often turn to parental student loans and private financing to be able to send their children to college, according to the report.
How Student Debt Became a Crisis
Tuition and fees have more than doubled over the past 20 years, reaching $11,260 on average at the state’s public four-year colleges in the 2023-2024 academic year. At private four-year colleges, it now costs $41,540 a year, according to the College Board, which tracks trends in college prices and student aid.
“Tuition costs have been rising faster than inflation for decades, and incomes haven’t kept up,” said Sandy Baum, a senior fellow at the Urban Institute’s Center on Education Data and Policy. “This is a serious problem.”
Without financial aid, the price of some four-year colleges and universities — after accounting for tuition, fees, room and board, books, transportation and other expenses — is now approaching $100,000 dollars per year.
Because so few families can afford the rising costs, they are increasingly turning to federal and private assistance to help pay their bills.
“Tuition and fees represent less than half of the total cost of college,” said Ellie Bruecker, interim research director at the Institute for College Access and Success. “Students will still need financial assistance to meet other needs.”
How Families Pay for College
Last year, the amount families actually spent on education costs was $28,026 on average, according to Sallie Mae’s annual report, How America Pays for College, an increase of more than 10 percent from to the previous year.
While parents’ income and savings cover nearly half of college costs, free money from scholarships and grants accounts for more than a quarter of the costs and student loans account for most of the rest, the study found. education lender.
Grants are a key funding source, but only about 60 percent of families use them, Sallie Mae found. Those who did received an average of $8,149.
The vast majority of families who did not use the grants said it was because they did not even apply.
Why fewer students are filling out a FAFSA
To obtain college aid, students must first file a FAFSA.
The FAFSA serves as a gateway to all federal aid, including loans, work-study, scholarships, and grants, which are the most desirable type of aid.
This year, problems with the new FAFSA have discouraged many high school students and their families from completing an application.
As of April 12, according to the National College Attainment Network, only 29% of the high school class of 2024 had completed the FAFSA, a drop of 36% from a year ago.
As application deadlines approach, fewer students know how they will pay for college next year.
“Even if all of this had gone perfectly, the financial aid system no longer has the same purchasing power as it did a few years ago,” Bruecker says. said.
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