More Than 1 in 10 Federal Student Borrowers Owe $100K

More than 1 in 10 federal student loan borrowers are carrying balances exceeding $100,000, according to TransUnion’s U.S. Consumer Credit Database.

One factor contributing to higher balances is the rising cost of a college education. NPR reports that average tuition at public and private four-year colleges has essentially doubled over the past three decades after adjusting for inflation.

We spoke with Joshua Turnbull, Senior Vice President of Consumer Lending at TransUnion, who pointed out that college costs have risen much faster than earnings for four-year degree holders.

“The cost of education certainly continues to outpace the rate at which earnings increase,” Turnbull told us.

The average federal student loan balance among borrowers in repayment is now almost $37,000, according to TransUnion. Graduate degrees can push those balances into the $100,000 range, Turnbull said, though some higher-priced degrees tend to yield higher salaries.

How to Handle $100K in Student Loans

While high levels of student loan debt can be alarming, it’s important to make a repayment plan that fits your need and goals.

“A $100,000 student loan balance can feel overwhelming, but don’t treat it like a five-alarm emergency. Treat it like a long-term financial project,” Corinna Rose, an accredited financial counselor and paraplanner at Bell Investment Advisors, told us.

Steve Min, Chief Credit Officer at Credit One Bank, told us borrowers should begin by identifying their loan types, balances, and interest rates.

“Federal loans can provide you with many income-driven repayment plans and programs for forgiveness, so explore your options there,” Min said.

“Treat (student loan debt) like a long-term financial project.” — Corinna Rose, AFC®, Bell Investment Advisors

But eligibility and forgiveness requirements vary by program so borrowers should always confirm that their loans, repayment plan, and employment qualify before relying on forgiveness as a repayment strategy.

Min warned that lifestyle creep can make repayment more difficult as borrowers sometimes spend more as their earnings rise. Raises, bonuses, and tax refunds can instead be directed toward the highest-interest loan, he said.

Paying off $100,000 tends to take time so it’s wise to be patient and plan wisely.

“The fact is that they didn’t get into the situation of debt quickly, and they’re not going to get out quickly,” Mike McMeans, a certified financial planner at Silverling Financial, told us.

Will Your Student Loan Investment Pay Off?

“For future borrowers, the best way to avoid six-figure debt is to think like an investor before borrowing: if the degree will cost $100,000, make sure the expected career and income justify the price tag,” Rose said. “Student loans are easiest to manage when you ask that question before signing, not after graduation.”

Do some digging on your future career path. How much are you likely to make in your first year of full-time employment after you graduate from college? This will guide how much debt it makes sense to borrow.

“The best advice is to not borrow more than you will make in your first year working,” McMeans told us.

Min also urged students to compare the full cost of a degree with realistic starting salaries in their chosen field before borrowing.

“Get every dollar in grants, scholarships and work-study opportunities, and start with the path of lowest cost first, such as community college or your local school,” Min told us. “Take out only as much as you need, not the maximum available to you.”

Although some borrowers may eventually qualify for forgiveness or discharge, students should plan to repay everything they borrow.