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Student Loan Debt – A Spinwheel Overview

Student Loan Debt – A Spinwheel Overview
October 16, 2021 | 9mins Read

Student loan debt in the United States is currently $1.6 trillion and is estimated to surpass $2 trillion by 2024. With 40% of debtors predicted to default by 2023, a significant part of student debt is unlikely to be paid off.

While the cost of higher education continues to skyrocket, and employers expect to hire employees with degrees – the reality of the situation remains dire. Starting earnings are frequently insufficient to cover the costs of student loan debt. With this trend, Americans will continue to default, and the student debt crisis will continue as the number of borrowers increases and the number of loans repaid decreases.

Student loan debt in the United States has now surpassed both car loans and credit card debt. While the cost of a college education remains relatively unchanged, low unemployment rates have hit fresh graduates hard, with their starting incomes not nearly enough to cover their student loan debt.

A look at the current situation

A little over 45 million people in the United States owe money on private student or federal loans. In the United States, about seven out of ten college students take out a loan to help pay for their education, with each student owing upwards of $30,000 when they graduate. Almost one-fifth of these students wind up owing more than $100,000 on their student loans.

Over half of people who took out student loans for a bachelor’s degree from a for-profit university will be unable to repay their loans and default. Not only does defaulting on a loan impose a strain on the borrower, but it also negatively impacts the economy. When a loan goes into default, the borrower’s credit score plummets, making buying a house, a car, or other substantial purchases more difficult.

Student Loan Debt Trends

While college degrees are associated with higher earning potential, earnings for new employees have not kept pace with rising college tuition costs. With their post-college wages, college graduates are unable to keep up with their monthly payments. College dropouts, students who attend two-year universities, and for-profit college students are even less likely to be unable to repay their student debts.

The source of loans is the crucial difference between the real estate and student loan bubbles. While commercial lenders played an essential part in the mortgage industry, the federal government holds the majority of student loans. On the other hand, the federal government is less likely to go bankrupt in the same way that private financial companies did.

For-profit colleges and private universities, which rely primarily on tuition to stay alive, are likely to be the hardest hit if the student debt bubble bursts. Public colleges also should expect pain as governments are not rushing to close budget shortfalls.

Student loans are unsecured – which implies that future earnings and wages are the only collateral available to retrieve the loaned amount, is crucial. Students can spend a lifetime attempting to repay a college loan. Bankruptcy does not always provide relief, and banks may withhold income to repay a defaulted student debt.

Keeping a tab on student loan debt – Avoiding the bubble

Student loan debt has been a considerable focus for the past few decades and is still a significant focus as it affects many Americans. Congress and many political leaders and lobbyists have been working towards bringing down the student loan debt and possibly having free tuition for undergraduates. However, many of these ideas may take a long time to come to full fruition, but there are a few things we can do now, if not work on sooner, to avoid a significant bubble pop.

The following are a few possible strategies governments and businesses can consider when dealing with borrowers and the student loan debt crisis:

  • Government-assisted programs (federal and state level)
  • Loan caps or loan ceilings
  • Reduced college tuition fees
  • Further education on loans for the borrower 
  • Debt management solutions
  • Know-how on loan repayment choices and the implications of defaulting on payments
  • Innovative loan repayment strategies
  • Options for refinancing loans
  • Easy and affordable student debt advising services and apps

The new full-suite student loan debt solution 

Spinwheel has developed cutting-edge debt APIs that focus on ease-of-access – making the already familiar financial wellness and debt repayment apps more intelligent and efficient than ever. Spinwheel gathers borrowers’ financial data to optimize student loan payments, help employees manage debt efficiently, and provide intelligent debt repayment calculators that any debt management company would love to have.

Spinwheel is the leader in debt API development, and thanks to their easy-to-use, low-code drop-in API modules, your developers are off to the races from the get-go. Spinwheel has a strong focus on helping tackle student loans and student loan repayments and dedicates its efforts to assisting borrowers to get out of debt sooner by empowering borrowers to have a happier and healthier relationship with debt. Learn more about Spinwheel here or contact our sales team here.


About the author: Spinwheel is on a mission to make it easier to manage debt. Our Loan APIs make it easy to embed consumer loan data, including credit card debt, student loans, personal loans, auto loans, and mortgages, directly into your app or product. With just one connection, you'll be able to help your business and your users improve financial outcomes. We call this Better Debt. Read More >

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