The current amount of outstanding student loans is approximately $1.7 trillion; meanwhile, the total outstanding credit card debt stands at $922 billion. As you can see below, student debt has risen continuously over the past decade and a half, continuing a trend over the previous four decades.
Figure 8.1. Board of Governors of the Federal Reserve System (US), Student Loans Owned and Securitized [SLOAS], retrieved from FRED, Federal Reserve Bank of St. Louis; September 30, 2021.
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Borrowing money for a college education is an investment. In 2020, the average annual salary of a high school graduate in the United States was $37,000 while the average annual salary of a college graduate was $61,000. Those with a college degree will earn at least 60% more money for over their lifetime. In addition, a college degree is more likely to lead to career advancement. Considering a cost/benefit analysis of college degrees, we can calculate a return on investment (ROI) for a college degree. In 2019, the CollegeBoard reported that a moderate college budget for a four-year in-state public college averaged $26,590 while a moderate budget at a private college averaged $53,980. Thus, the return on investment would look like this:
The ROI for a private college can be calculated the same way:
In comparison, the stock market has an average annual return of 10%. This also does not include any cost of living increases or other raises. However, this assumes that you graduate from college, as the higher salaries above are for college graduates.
Student debt has been driven higher by the relentless cost of a college education, having grown 145% since 1971:
Figure 8.2.Average College Tuition.