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Of the many protections put in place to shield consumer finances from the impact of COVID-19, the suspension of federal student loan repayment has been one of the most significant.
As part of the Coronavirus Aid, Relief and Economic Security (CARES) Act passed in March 2020, the interest rate for federal student loans was set to 0% and most federal student loan payments were automatically paused for a period that was recently extended to October 2021. This payment pause applied only to eligible federal loans—not privately issued debt—and consumers could continue making payments if they chose to do so.
As a result of this measure and other factors, outstanding student loan debt in the U.S. has grown at double the rate it had in previous years—now reaching a record high of over $1.57 trillion. The number of loans currently in forbearance or deferral is more than double what it was 12 months ago, highlighting consumer adoption of the pandemic's payment pause.
As part of our ongoing review of debt in the U.S., Experian reviewed consumer credit data from 2019 and the third quarter (Q3) of 2020 to learn how American's student loan debt changed during the pandemic. Read on for our insights and analysis.
Student Loan Debt Reaches New High Amid Paused Repayment
All types of debt have seen significant change during the pandemic—for example, credit card debt decreased significantly while mortgage borrowing increased at record levels—but student loans saw the greatest change of any debt. From 2015 to 2019, student loan debt grew at an average rate of just under 6% per year—making it one of the slowest-growing consumer debts. Since 2019, however, the overall student loan balance increased by 12%—the largest annual growth rate of any debt type.
Total student loan debt in the U.S. reached a record high of $1.57 trillion in 2020—an increase of about $166 billion since 2019. And while debt is up 12%, the total number of accounts saw little growth (+0.3%), showing that it's not necessarily new borrowing driving the debt increase, but new borrowing on top of existing debt not being paid off. In fact, as of Q3 2020, 72% of student loan accounts were reported as in forbearance or deferral, according to Experian data. Compared with the same period in 2019, that's an increase of 37 percentage points.
|Snapshot: Overall Student Loan Debt|
|Total outstanding debt||$1.4 trillion||$1.57 trillion||+$165.9 billion (12%)|
|Total number of accounts||164.7 million||165.2 million||+0.5 million (0.3%)|
Student Debt in Forbearance Doubles During Pandemic
As noted, the number of loans in forbearance or deferral has reduced student loan repayment and contributed to total balances rising substantially. Student loan debt not in repayment spiked 114% in 2020, while the total number of accounts with this status doubled, growing 104%, according to Experian data.
Overall, the 72% of accounts in forbearance or deferral in 2020 represents nearly $1.1 trillion worth of paused student loan debt—that's a $584 billion increase since 2019.
|Student Loan Debt in Forbearance or Deferral|
|Total balance||$512.1 billion||$1.096 trillion||+$583.9 billion (114%)|
|Total number of accounts||57.9 million||118.3 million||+60.4 million (104%)|
Individual Student Loan Balances Reach Record High
As many consumers aren't actively paying down their student loans, individual balances grew by 9%, or over $3,000 per consumer, to a record high of $38,792, according to Experian data.
This rate of increase—while not as significant as the overall balance growth—was still slightly higher than the average 6% spike in individual balances seen from 2015 to 2019.
|Snapshot: Individual Student Loan Debt|
|Avg. student loan balance||$35,620||$38,792||+$3,172 (+9%)|
Consumers With Lowest Credit Scores See Smallest Balance Increase
While student loan debt increased by 9% nationally, consumers in different credit score ranges saw varying degrees of growth in the past year. The consumers in the lowest credit score range—with scores of 300 to 579—saw their student loan debt grow by only 3%, the smallest increase recorded by any score range.
Just one score tier above—consumers with average FICO® Scores☉ between 580 and 669—saw their student loan debt grow by 10% in 2020. And though this group's credit scores are only one tier higher, their debt growth was three times as great.
|Change in Student Loan Debt by FICO® Score Range|
Student Loan Delinquency Rates Drop With Repayment Halted
As part of the pandemic relief for student debt, repayment on all qualifying federal loans was suspended, which also suspended delinquencies.
As a result, student loan delinquencies have plummeted, dropping by double-digit percentages across all delinquency ranges. The percentage of severe delinquencies saw the greatest improvement, with the ratio of accounts 80 to 180 days past due (DPD) dropping by nearly 95%, according to Experian data.
|Student Loan Delinquency Rates|
|Delinquency Period||2019||2020||Percent Change|
|% of accounts 30-59 DPD||0.044||0.023||-47%|
|% of accounts 60-89 DPD||0.136||0.098||-27%|
|% of accounts 90-180 DPD||5.754||0.299||-94%|
These improvements in the delinquency rate have also been seen across other types of debt—including mortgage, personal loan and credit cards. Whether this is a result of lender accommodations or guidance for credit reporting during the pandemic, this drop in delinquencies has helped consumer credit scores and hopefully will continue to as time goes on.
Average FICO® Score Among Student Loan Borrowers Increased
The average FICO® Score among consumers with a student loan account increased by seven points since 2019, according to Experian data. This improvement is in line with the national average, which also grew by seven points in the past year.
|Average Consumer FICO® Scores|
|Average FICO® Score for consumers with a student loan||682||689|
|Average FICO® Score among all consumers||703||710|
It's difficult to estimate what degree of influence—if any—the pandemic's student loan repayment pause has had on borrowers' credit scores. What is clear from the data, however, is that the pause in repayment—and the wide adoption of this non-payment option—has not (yet, at least) had a negative impact on consumer credit scores. This is a positive sign that student loan relief has been successful in protecting consumer finances during the economic downturn.
Generation Z Had Highest Spike in Balances in 2020
It came as no surprise that members of Generation Z, the generation to which most current college students belong, saw the largest increase in student loan debt since 2019. This age group also recorded the largest spikes in personal loan and mortgage balances. As members of the younger generations age, they gain access to new credit opportunities and their balances tend to increase over time.
Members of Generation X—who have the largest student loan burden of any age group—saw their balances grow 13% in 2020, according to Experian data. The amount of student loan debt they owe increased by $5,114, bringing their average individual balance to just over $45,095.
|Change in Average Student Loan Debt by Generation|
|Generation Z (18-23)||$12,495||$17,338||39%|
|Generation X (40-55)||$39,981||$45,095||13%|
|Baby boomers (56-74)||$34,957||$40,512||16%|
|Silent generation (75+)||$25,614||$28,052||10%|
Source: Experian; Ages as of 2020
When analyzing how federal student loan debt is distributed across generations, it may be striking that middle-aged consumers carry more debt than those near college age. One possible explanation is the use of federal Parent PLUS loans, which allow parents to take on student debt for their children.
Though the data on Parent PLUS loans is scarce, a study in 2019 reported that nearly 1 million parents had taken this type of loan, averaging over $16,000 each per borrower. The burden of Parent PLUS loans also varies from school to school: In some instances, it's estimated that 10% to 15% of parents take these loans, some borrowing more than $60,000, according to data from the U.S. Department of Education.
Consumers in All States Saw Increased Student Loan Debt in 2020
In line with the increases in student loan debt seen across each generation and credit score range, consumers in all 50 states and the District of Columbia also recorded growth in their average individual balances in 2020, according to Experian data.
Growth across the states ranged from a high of 14% in Alaska to a low of 4% in North Dakota. In the majority of states—28—consumers saw their average balances grow by the national average of 9% or more.
Student loan borrowers in the District of Columbia had the highest debt burden in 2020, with an average balance of $60,651. They were followed by consumers in Georgia, California, Maryland and Virginia as the top five states with the highest balances. Notably, New York, which in 2019 had one of the top balances in the country, moved out of the top five in 2020.
North Dakota—the state with the least growth—also had the lowest consumer student loan balance, of just $30,449.
|Average Student Loan Balance by State|
|State||Average FICO® Score||2019||2020||Change|
|District of Columbia||713||$56,000||$60,651||+8%|
How Student Loan Forbearance Likely Helped Finances Overall in 2020
Based on the changes to consumer credit files, it appears as if the pandemic and the protections put in place to insulate consumer finances have—at least in part—succeeded when it came to student loan debt.
Instead of consumers falling behind on payments, becoming delinquent and subsequently seeing this have a negative impact on their credit, a majority of consumers now have their student debt on pause and their credit scores are improving along with the rest of the country.
The pause in student loan repayment—for those that chose not to continue making payments on their debt—may have also impacted consumers' ability to pay down other debts and could have provided vital funds for Americans struggling financially during the pandemic.
Credit and Debt Trends in Changing Times
Though initial data shows student debt increasing and average credit scores trending upward, it's important to recognize that this data is a snapshot taken during a turbulent period. Additionally, most of these changes occurred over a period of less than a year and are subject to further change as time goes on.
This analysis looks at the most recent (upon date of publication) data from Q3 2020 and compares it with an annual snapshot for 2019 and other years cited. Experian will continue to monitor changes to consumer credit reports and will provide updates when notable change occurs.