Student Loan Milestone: Nearly 1 Million Borrowers Owe More Than $200,000

Student loan debt continues to soar to unimaginable heights, with no signs of a slowdown.  According to Federal Reserve Bank of New York data released in February 2021, student loan debt was a staggering $1.56 trillion at Q4 2020, a $9 billion increase from the previous quarter.

Though the average student loan debt for the class of 2019 was $28,950, according to The Institute for College Access and Success, the amount of borrowers with high debt loads is about to hit a new milestone. Close to 1 million borrowers owe more than $200,000 in student loan.

Read on to learn more this student loan milestone and what’s driving it.

New record: Borrowers with $200,000+ in student loans to exceed 1 million

The Federal Student Aid publishes quarterly reports about the federal student loan portfolio where you can review data by loan type, debt size, location, school type and more. When looking at Federal Student Loan Portfolio by Borrower Debt Size, it’s clear that high-debt borrowers are on the path to hit one million borrowers soon.

According to Q4 2020 data, the amount of borrowers who owe more than $200,000 has been at 900,000 borrowers for the past three quarters.

Federal fiscal year	Federal fiscal quarter	Dollars outstanding in billions	Borrowers in millions
2017	Q2	$163.2	0.6
2017	Q3	$167.2	0.6
2017	Q4	$176.0	0.6
2018	Q1	$182.0	0.6
2018	Q2	$191.6	0.7
2018	Q3	$197.6	0.7
2018	Q4	$206.4	0.7
2019	Q1	$212.7	0.7
2019	Q2	$222.3	0.8
2019	Q3	$229.3	0.8
2019	Q4	$239.8	0.8
2020	Q1	$245.8	0.8
2020	Q2	$256.0	0.9
2020	Q3	$257.6	0.9
2020	Q4	$263.1	0.9

Source: Federal Student Aid website, Portfolio by Debt Size

As you can see from the chart above, the amount of borrowers who owe more than $200,000 in student loan debt has been on the rise for the past several years. In 2020, the outstanding debt for borrowers who owed more than $200,000 increased from $245.8 billion in Q1 and by year’s end, rose to $263.1 billion.

For American borrowers, outstanding student loan debt has the highest balance when compared to other types of debt such as credit card debt, auto loans, and other types of debt.

What if this six-figure borrower growth rate continues?

Federal Student Aid doesn’t disclose the exact amount of student debt or the number of borrowers past the first decimal point. Hence, we have to approximate the rate of annual growth.

Comparing Q2 of 2017 to Q2 of 2020, the annual rate of growth in the number of borrowers is about 14%. The rate of growth in the debt those borrowers owed was 16%.

Using the Q4 numbers of $263.1 billion and 0.9 million borrowers, what could the number of borrowers who owe more than $200,000 in student loan debt look like, if nothing changes?

Here’s the result below.

Year	Borrowers in millions	Billion dollars
2020	0.9	$263.1
2030	3.3	$1,160.6
2040	12.4	$5,120.1

Although there could be major shocks to the higher education system that slow the rate of student debt growth, these statistics show the need for change.

In the past three years, the number of borrowers who owed less than $20,000 actually declined as a strong economy allowed borrowers to eliminate their debt.

The rate of growth in the number of borrowers started became noticeable at the $80,000 level and above. The highest rate of growth in the number of borrowers was in the $200,000 and above category we’re discussing here.

Tuition is skyrocketing

So what’s behind the rising number of borrowers owing more than $200,000? A big part of it is the cost of attendance when it comes to pursuing higher education.

According to a recent College Board report, the average budget for a four-year, in-state student at a public college is $26,820. Budget requirements increase for out-of-state students at public colleges at $43,280 on average, while the average budget for a student attending a private college is as high as $54,880.

Based on this information, it’s easy to see that even a four-year, in-state public college education could easily cost six-figures. For out-of-state students who attend public school, that number inches closer to $200,000 and for private schools, the total cost of attendance could easily be more than $200,000.

Federal loans are easy to get

Another reason for the increase in the number of borrowers at such high loan amounts is the fact that federal student loans are easy to get.

Many federal loans don’t require a credit check. PLUS Loans for graduate students and parents, which require a credit check, allow borrowers to take out loans up to the cost of attendance. Based on that logic, schools can charge what they want and there’ll always be a federal loan option to help cover those costs.

More people are going back to school

On top of rising tuition costs and loans that are easily accessible, more people are going back to school due to the pandemic and economic volatility.

As the economy floundered last year, there was a report of a huge surge in grad school applications, especially for business, law school, and medicine.

When the economy is in a downfall or during times of uncertainty, many people look toward higher education as a way to boost their skills and employability. It’s not just high-debt and high-income professionals returning to school either.

According to Inside Higher Ed, “…professional programs aren’t the only ones seeing high application volumes. Programs in philosophy and psychology, for example, are also seeing double-digit increases. Take the graduate psychology programs at Loyola University Maryland. Applications to the doctorate in clinical psychology were up 62 percent this past year. Applications to its master's were up 50 percent.”

Basically we’re seeing a mass return to school, in part due to the pandemic, job loss and economic uncertainty.

The bottom line

The more people go back to school, the higher the amount of student loan borrowers there are. Given the high price tag on many of these colleges, it makes sense that soon we’ll hit the one million borrower mark for those who owe more than $200,000.