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Student loan debt has grown double since the pandemic to record-high levels—here's what to know

Experian data finds student loan debt reached a new high during 2020.

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The pandemic significantly changed how Americans borrowed money in the last year.

Thanks to historically low interest rates for new homeowners and stimulus checks that gave consumers windfalls of cash, mortgage borrowing went up while more credit card balances got paid off.

Student loan debt, however, had the biggest change of any debt type, credit bureau Experian found.

Experian's latest data shows a record high in student loan balances in 2020, after four years of being one of the slowest-growing consumers debts. From 2015 to 2019, student loan debt increased only about 6% per year, but since the onset of the pandemic, that growth has doubled.

In the past year, the overall student loan balance increased by 12%, Experian found. Total U.S. outstanding student loan debt is now over $1.57 trillion, a record high and $166 billion increase year over year.

Most of this increase in student loan debt can be attributed to the federal loan payment pause that began with the CARES Act and has since extended until October 2021. With these Covid relief measures put into place early on in the pandemic, the number of loans currently in forbearance or deferral is more than double what it was a year ago, according to Experian data.

Here's a look at Experian's findings on student loan trends.

Consumers are borrowing more, plus not paying off their existing debt

Despite a 12% increase in overall student loan debt, Experian found that new student loan originations saw little growth in 2020.

It's not necessarily new borrowing that is driving record-high levels of student loan debt, but it's borrowers taking out more loans on top of the ones they already have outstanding. Borrowers are taking advantage of the paused repayment on their federal loans by not making any payments at all.

Experian found that student loan debt not in repayment spiked 114% in 2020, while the total number of accounts with this status doubled, growing 104%.

Student loan borrowers see record-high balances

Since most borrowers aren't paying off their student loans at this time, Experian data found that individual balances grew to a record-high of $38,792. This is an increase of over $3,000 per borrower.

The 9% increase in borrowers' balances outpaces the 6% rise in balances that occurred between 2015 to 2019.

Those borrowers who saw the biggest spike (10%) in their balances last year had an average credit score between 580 and 669, which is considered "fair" on the FICO® Score model.

Student loan delinquency rates decrease

The suspension of federal student loan payments in effect since March 2020 with the passing of the CARES Act has caused delinquencies to drop significantly.

Student loan delinquency rates across all 'days past due' (DPD) ranges (30 to 59 DPD, 60 to 89 DPD and 90 to 180 DPD) went down by double-digit percentages.

These improvements in delinquency rates have been seen with most types of debt, including credit cards, mortgages and personal loans, which certainly helps to improve borrowers' credit scores.

Nearly three-fourths of student loan accounts are in forbearance or deferral

According to Experian data from Q3 2020, 72% of student loan accounts were reported in forbearance or deferral. These 72% of accounts alone represent almost $1.1 trillion worth of paused student loan debt.

Instead of paying down their student loans, borrowers can use this money to cover higher-priority expenses, like housing, food and utilities. However, those that can keep up with basic monthly costs may want to consider still paying down their federal loans even during the forbearance period, when the money goes directly toward their principal balance.

As borrowers wait to see if any student loan forgiveness will happen in the coming months, they can also deposit their monthly loan payments into a FDIC-insured high-yield savings account while interest is at 0%. This strategy will prepare a nest egg and help them be ready to make payments again or, in the case of forgiveness, it will give them an emergency fund to have as a safety net.

A high-yield savings like the Synchrony Bank High Yield Savings offers an above-average interest rate, plus an ATM card that gives you easy access to your cash should you need it in the meantime.

Whether borrowers choose to hold off on their federal loans right now or to start making payments is entirely up to them. The most important takeaway is to have a plan in place so that when payments do eventually resume, they know their next best move.

Synchrony Bank High Yield Savings

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Information about the Synchrony Bank High Yield Savings Account has been collected independently by CNBC and has not been reviewed or provided by the bank prior to publication.

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