The average college graduate in 2018 carried a student loan debt of $28,565, according to new data from LendEDU, which noted this debt load can have a serious impact of the young borrowers’ debt-to-income (DTI) ratios.
LendEDU noted that the Consumer Financial Protection Bureau recommended that the maximum acceptable DTI for most lenders is 43 percent, although many lenders consider a DTI of 36 percent or less to be a healthier level. In a student of nearly 10,000 student loan borrowers, LendEDU determined an average projected DTI of 12.95 percent, with nearly 16 percent of private student loan applicants having a projected DTI over 20 percent upon graduating from college.
“Many of these young Americans will likely be looking at a DTI over the ‘healthy’ threshold of 36 percent, while also likely approaching or exceeding a DTI of 43 percent, which is considered the ‘no-fly zone’ for lenders during the approval process,” said Mike Brown, research analyst at LendEDU. “Even average student loan borrowers, whose DTI is around 13 percent are leaving little leeway for their debt to grow beyond just student loan payments. The findings from this dataset depict the overwhelming burden of student loan debt faced by so many young Americans. With these payments already taking up a good chunk of their monthly income, many borrowers look like dangerous propositions in the eyes of lenders and will struggle to secure financing in the future.”