Valerie Plesch | The Washington Post | Getty Images
The U.S. Department of Education is taking aggressive steps to restart collections on federal student loans that are in default — just as current high school seniors are set to rack up new balances on their path to a college degree.
Currently, around 42 million Americans hold federal student loans and more than 1 million high school graduates will take out new education debt in the months ahead, according to higher education expert Mark Kantrowitz.
By the time they graduate college, these students could each borrow as much as $40,000, on average, in federal and private aid to earn a bachelor’s degree, according to a new Banking Herald analysis of data from the Education Department, up from $37,000 the year before.
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The college affordability problem
Every year, new students are pumped into the student loan system while many current borrowers struggle to exit it. Despite historic student loan forgiveness efforts under former President Joe Biden, the country’s education debt tab has mostly ticked higher.
“We haven’t been able to get our arms around the college affordability problem more broadly,” said Michele Zampini, senior director of college affordability at The Institute for College Access & Success. “There are new enrollments every semester and the pile up continues.”
Around 45% of 2025 high school graduates will go on to a four-year college, according to Banking Herald, and more than one-third of them will take out student loans to help cover the tab.
College tuition costs have risen significantly in recent decades, averaging a 5.6% annual increase since 1983, outpacing inflation and other household expenses, according to a separate report by J.P. Morgan Asset Management. And families now shoulder 48% of college expenses, up from 38% a decade ago.
“Most people don’t have the money to make those payments out of pocket,” Zampini said.
To bridge the gap, students and their families have been borrowing more, which has boosted total outstanding student debt to more than $1.6 trillion.
In a Wall Street Journal op-ed Monday, U.S. Secretary of Education Linda McMahon said that some institutions make “empty promises to students while pocketing their loan dollars.”
“Colleges and universities call themselves nonprofits, but for years they have profited massively off the federal subsidy of loans, hiking tuition and piling up multibillion-dollar endowments while students graduate six figures in the red,” she wrote.
Deep cuts in state funding for higher education have also contributed to significant tuition increases and pushed more of the costs of college onto students, other reports show.
These days, tuition accounts for about half of college revenue, while state and local governments provide much of the rest, according to the Center on Budget and Policy Priorities. But roughly three decades ago, the split was much different, with tuition providing just about a quarter of revenue and state and local governments picking up the bulk of the difference.
“We’ve haven’t actually seen a good faith effort to work through that comprehensive problem,” Zampini said. “What we’ve seen instead is a bit of an attack strategy on higher education in general.”