U.S. student debt strains household finances as college costs rise

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U.S. student debt strains finances

Highlights

Federal education debt tops $1.7 trillion with over 42 million U.S. borrowers, up from $516 billion and 28 million two decades ago.
Inflation-adjusted average private college tuition has tripled since 1971-72, reaching $45,000 in 2025-26 and rising 5.5% annually, outpacing inflation and wages.
Job openings for entry-level roles fell 35% between 2023 and 2025, with 3.8 million borrowers owing over $100,000 and repayment plans becoming more restrictive.

Rising costs and weaker borrower protections

As reported by CNBC, the long-held view of student loans as "good debt" is being challenged by a mix of higher college costs, larger balances and recent policy changes that reduce support for borrowers facing financial stress.

Federal education debt now exceeds $1.7 trillion, with more than 42 million Americans carrying those loans, up from about $516 billion and 28 million borrowers 20 years ago. Public skepticism is also deepening, with a 2025 Pew Research Center study showing nearly eight in 10 adults say colleges and universities are doing only a fair or poor job of keeping tuition affordable.

The cost increase is especially stark at private four-year colleges. Inflation-adjusted average tuition and fees rose from $14,550 in the 1971-72 academic year to $45,000 in 2025-26, while J.P. Morgan Asset Management says tuition has increased about 5.5% a year on average since 1983, outpacing both inflation and wage gains.

Repayment uncertainty is adding another layer of risk. The Trump administration's overhaul of the federal student loan system through the OBBBA eliminates several affordable repayment plans and cuts back relief options, including the ability to pause federal loan payments during unemployment.

Job market pressures reshape return on investment

Borrowers are also carrying debt for longer and in larger amounts, making the financial payoff of a degree less certain. The average student loan balance now stands at $40,768, up from $30,414 a decade ago, while the number of borrowers owing more than $100,000 has grown to 3.8 million from 2.4 million over the last 10 years, according to an analysis by higher education expert Mark Kantrowitz.

Labor market changes are reinforcing that concern, particularly for younger workers entering white-collar fields. Revelio Labs reports that job openings for entry-level roles fell 35% between 2023 and 2025, largely because of artificial intelligence, a trend that is narrowing opportunities in areas such as technology.

Carolyn Fast, director of higher education policy at The Century Foundation, says students are being asked to make decisions with long-term financial consequences without clear visibility on future job prospects or the rules that will govern their debt. That combination of higher upfront costs and weaker predictability is making college financing a growing liability rather than a straightforward investment for many households.

In our earlier article on the benefits of early-career job-hopping, we explained that frequent job changes can be a major driver of wage growth and a path to better long-term job matches. Citing economic research, we noted that switching roles early in a career accounted for a significant share of lifetime earnings gains in one landmark study, and that later work supports the idea that avoiding mobility can limit pay progression—an important backdrop as today’s entry-level market becomes more uncertain.

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