The characterization of student loans as “good debt” has come under intensifying scrutiny as multiple factors have combined to make higher education financing more precarious for borrowers. The scale of the student debt burden has expanded dramatically, with the federal education debt portfolio growing from $516 billion held by 28 million borrowers two decades ago to $1.7 trillion across more than 42 million borrowers currently.
Tuition costs have risen substantially faster than inflation and wage growth. The average annual price at a private four-year college reached $45,000 in the 2025-2026 academic year, compared to approximately $14,550 in the 1971-72 academic year when adjusted for inflation. Including room and board, annual expenses at private institutions now average $60,920, with some institutions charging over $100,000 annually. This escalation has outpaced inflation by approximately 5.5% yearly since 1983. College administrators attribute these increases to declining enrollment, rising operational costs, and reductions in state funding for higher education.
Borrowers are accumulating larger debt balances that require extended repayment periods. The average student loan balance stands at $40,768, up from $30,414 a decade ago. The number of borrowers owing more than $100,000 has increased to 3.8 million from 2.4 million over the past decade, with average balances in this category rising to approximately $187,000 in 2026 from $172,000 in 2017. Extended repayment timelines create prolonged financial constraints that delay other wealth-building milestones such as homeownership and retirement savings.
Recent federal policy changes have further complicated borrowers’ circumstances. The Trump administration’s implementation of the “one big beautiful bill” act eliminated several affordable repayment plans and reduced borrower protections, including the ability to pause payments during unemployment. The new Repayment Assistance Plan extends repayment timelines to 30 years, compared to the 20 or 25-year terms of eliminated plans. Defaulting on federal student loans has increased sharply, with approximately 9.3 million borrowers in default as of June 30, representing roughly 50% growth since 2016.
Public confidence in the value proposition of higher education has declined correspondingly. Recent surveys indicate that nearly 80% of Americans believe the federal student loan system is broken, while 55% rate colleges poorly at preparing students for well-paying jobs in the current economy.
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