Board of Governors of the Federal Reserve System

Student Loans

Over half of young adults who went to college took on some debt, including student loans, for their education. Repayment of this debt can be challenging.

In 2017, one-fifth of those with education debt were behind on their payments. Individuals who did not complete their degree or who attended a for-profit institution are more likely to struggle with repayment than those who took on large amounts of debt but completed a degree from a public or not-for-profit institution.

Overview

Forty-two percent of those who attended college, representing 30 percent of all adults, have incurred at least some debt from their education. This includes 22 percent who still owe money and 20 percent who have already repaid their debt. Adults under the age of 30 who attended college are more likely to have taken out loans than older adults, consistent with the upward trend in educational borrowing over the past several decades (figure 31).⁴⁰

Many forms of debt are used to finance education. Student loans are by far the most common form, held by 94 percent of those with their own education debt outstanding. In addition, 30 percent have some other form of debt for their education, including 25 percent who have borrowed with credit cards, 6 percent with a home equity line of credit, and 7 percent with some other form.⁴¹ The typical amount of education debt in 2017 among those with any outstanding was between $20,000 and $25,000.⁴²

Almost 3 in 10 adults with outstanding education debt are not currently required to make payments on their loans. Such deferments are common for those still in college. Of those who are making payments, the typical monthly payment is between $200 and $300 per month.

Education debt is also taken out to assist family members with their education (either through a co-signed loan with the student or a loan taken out independently). Although this is less frequent than borrowing for one's own education, 4 percent of adults owe money for a spouse's or partner's education and 5 percent have debt that paid for a child's or grandchild's education. Similar to debt outstanding for the borrower's education, debt for a child's or grandchild's education can be in forms other than a student loan (table 32).

Table 32. Type of education debt (by whose education funded)

Student Loan Payment Status

Among those with outstanding student loans from their own education, 20 percent were behind on their payments in 2017. This rate is up slightly from 19 percent in 2016 and 18 percent in 2015.

Those who did not complete their degree are the most likely to be behind on payments. Over one-third with student loans outstanding and less than an associate degree are behind versus one-quarter of borrowers with an associate degree.⁴³ The delinquency rate is even lower among borrowers with a bachelor's degree (11 percent) or graduate degree (5 percent).

Since the level of education rises with debt levels, those with more debt often have less difficulty with repayments. Twenty-seven percent of borrowers with less than $10,000 of outstanding debt, and 20 percent of those with between $10,000 and $25,000 of debt, are behind on their payments. Among those with $100,000 of debt or more, the fraction who are behind is 13 percent.

Excluding those who have already repaid their student loans could overstate difficulties with repayment. The remainder of this section therefore considers the repayment status of all borrowers, including those who have completely repaid their loan. Among those who ever incurred debt from their education, 11 percent are currently behind on their payments, 42 percent have outstanding debt and are current on their payments, and 47 percent have completely paid off their loans.

Borrowers who were first-generation college students are more likely to be behind on their payments than those with a parent who completed college.⁴⁴ Among borrowers under age 30, first-generation college students are four times as likely to be behind on their payments as those with a parent who completed a bachelor's degree (figure 32).

Difficulties with repayment also vary across race and ethnicity. Black and Hispanic education borrowers are much more likely than white borrowers to be behind on their loan repayment and are less likely to have repaid their loans (figure 33). These patterns partly reflect differences in rates of degree completion and subsequent wages.

Repayment status also differs by the type of institution attended. Nearly one-fourth of borrowers who attended for-profit institutions are behind on student loan payments, versus 9 percent who attended public institutions and 6 percent who attended nonprofit institutions (table 33).

Table 33. Payment status of loans for own education (by institution type)

Greater difficulties with loan repayment among attendees of for-profit institutions may partly reflect the lower returns on these degrees.⁴⁵ It could also relate to differences in the educational backgrounds of students. Test scores of first-year students, a measure of admissions selectivity (also used in the "Higher Education" section), tend to be lower at for-profit institutions than at public or nonprofit institutions. However, even when selective schools are excluded, a gap in repayment remains.

 

References

 40. Student loan borrowing has declined since its peak in 2010-11 but remains substantially above the levels from the mid-1990s (Sandy Baum, Jennifer Ma, Matea Pender, and Meredith Welch, Trends in Student Aid 2017 (New York: The College Board, 2017), www.trends.collegeboard.org/sites/default/files/2017-trends-student-aid.pdf). Return to text

 41. Respondents who indicate that they have other debt for their education are asked to specify its form. Among those who provide additional specificity to this follow-up question, the most common responses are auto loans, personal loans, or borrowing from relatives. Return to text

 42. Education debt levels and monthly payments are asked in ranges rather than exact dollar amounts. Return to text

 43. The rate of being behind on payments for those with some college, a certificate, or a technical degree who are behind on their payments includes respondents who report that their highest degree is a high school degree or less who report that they are behind. These respondents likely incurred debt for higher education, but given their lack of completion of a higher degree, still consider their highest level of education to be their high school education. Return to text

 44. First-generation college students are defined here as those who do not have at least one parent who completed a bachelor's degree. Return to text

 45. See David J. Deming, Claudia Goldin, and Lawrence F. Katz, "The For-Profit Postsecondary School Sector: Nimble Critters or Agile Predators?" Journal of Economic Perspectives 26, no. 1 (Winter 2012): 139-64, for a discussion of the rates of return by education sector. Return to text