Education Debt and Student Loans

Among young adults who attend college, it is increasingly expected that at least a portion of their education will be financed through a student loan or other forms of borrowing. The survey asks respondents about their use of borrowing to finance their education and the status of student loans acquired for their education. The results show that the repayment status of student loans is highly correlated with the respondent's family background and the type of institution that they attended. In particular, individuals who either did not complete their degree or who attended a for-profit institution are disproportionately likely to fall behind on their student loan payments.

Education Debt Overview

Twenty-seven percent of adults report that they borrowed money to pay for expenses related to their own education, including 15 percent who currently owe money on these loans and 12 percent who borrowed money that they have since repaid. Among just those who completed at least some education beyond high school, 41 percent acquired at least some debt to finance that education, and half of those who completed at least a bachelor's degree acquired at least some debt in the process. Reflecting the increased rates of education borrowing among more recent cohorts of college attendees, respondents under age 45 are more likely to have taken out loans for each level of education (figure 31).

While education debt is often in the form of student loans, this is not the exclusive form of borrowing to pay for higher education expenses. Among respondents who report that they currently owe money for their educational expenses, 94 percent report owing money on student loans, but 21 percent have education-related credit card debt, 3 percent have a home equity loan or line of credit used for education expenses, and 4 percent have education debt of some other form.⁴⁰

Among respondents who report that they currently owe student loan debt for their own education, the mean level of this debt is $30,156 and the median is $12,000. (The median amount of education debt is consistently lower than the mean due to some individuals with large levels of debt). While education-related credit card debt levels are lower, the median amount of education-related credit card debt among those who have this debt is $3,000. Looking at all debt acquired for the respondent's own education combined, the median level of education debt is $14,000 (table 31).

Table 31. Form and amounts of education debt currently owed for own education

Form of debt	Percent of debt holders with form of debt	Mean debt (dollars)	Median debt (dollars)
Student loan	94.3	30,156	12,000
Home equity loan	2.5	57,550	40,400
Credit card	20.5	7,574	3,000
Other loan	4.3	11,969	9,000
Total	100.0	32,585	14,000

Note: Among respondents who have at least some debt outstanding for their own education. Some respondents have more than one type of debt.

The amount of outstanding education debt is closely related to the level of education that the individual acquired. Among respondents who have some college or a certificate, the median outstanding education debt is $8,000; ⁴¹ for those with an associate degree, it is $9,900; and among respondents with a bachelor's degree, the median is $19,162.⁴² Respondents who have completed a graduate degree are disproportionately likely to have large debt levels: the median debt for respondents with a master's degree is $36,000 and for those with a professional degree or a doctoral degree it is $100,000.

Not all respondents who have outstanding education debt are currently making payments on all of their loans. Thirty-nine percent of respondents with outstanding student loan debt from their own education indicate that one or more of their loans are in deferment. Eighteen percent report that they are behind or in collections on one or more of their loans (approximately half of whom also report that they have some loans in deferment or forbearance). Among those who indicate that they are currently making payments on one or more loans for their own education, the average monthly payment is $533, with a median payment of $180.

In addition to asking respondents about the financing of their own education, the survey also asks respondents if they borrowed money for the education of other family members. The results indicate that education debt extends beyond that acquired by the individual obtaining the education. In addition to the 15 percent of individuals who currently owe money on loans for their own education, 4 percent owe money for a spouse's education and 5 percent hold debt acquired for a child's or grandchild's education. Reflecting that some individuals owe money for multiple persons' educations, 22 percent of individuals say that they currently owe money on education loans for themselves or someone else.

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Student Loan Payment Status by Demographic and Education Characteristics

Among respondents who currently have outstanding student loans from their own education, 18 percent are behind on their payments. The likelihood of being behind is greatest among those who completed less education. Twenty-six percent of respondents with outstanding loans with some college, a certificate, or a technical degree are behind on their debt, and 21 percent of those that completed an associate degree are behind.⁴³ This compares to 12 percent of respondents with outstanding loans who completed a bachelor's degree and 7 percent of those with a graduate degree who are behind.

Notably, the inverse relationship between one's level of education and the likelihood of falling behind on payments also means that respondents with higher levels of student loan debt actually, and perhaps counterintuitively, have a lower rate of falling behind on payments than those with lower levels of debt. Twenty-two percent of respondents with less than $10,000 of outstanding debt are behind on their payments and 17 percent of those with between $10,000 and $25,000 of debt are behind. Among respondents with over $100,000 of debt, the frequency of being behind on student loan payments is a lower 11 percent.

One limitation of focusing exclusively on those who currently owe money on their student loan debt when evaluating repayment status is that it excludes respondents who have successfully repaid their loan. As a result, it is possible for population groups that have a high rate of rapid repayment to appear as though default rates are high due to the exclusion of these successful repayments. Recognizing the value of including all loans when looking at the status of repayment, the remainder of this section considers the repayment status of all borrowers, including both those who have completely repaid their loan and those who have not. Among all respondents who have ever incurred debt from their own education, 9 percent report that they are currently behind on their payments, 47 percent have outstanding debt and are current on their payments, and 44 percent have completely paid off their loans.⁴⁴

Consistent with that observed when considering just those with outstanding student loan debt, the fraction of all borrowers--including those who have completely repaid their loan--who are behind on their student loan debt is greatest for those with lower levels of education. Seventeen percent of individuals who ever borrowed for their education but failed to complete any degree or who have just a certificate or technical degree are behind on their debt.⁴⁵ This compares to 10 percent of all borrowers who completed an associate degree that are behind, 6 percent of bachelor's degree recipients, and 3 percent of graduate degree recipients who are behind on their payments.

First-generation college students who took out a student loan for their education are also disproportionately likely to report being behind on their payments. As was also observed in the 2014 survey, among respondents under age 45, first-generation college students who ever borrowed are more than twice as likely to be behind on their payments as borrowers with a parent who completed a bachelor's degree (figure 32). This suggests that these individuals from lower socioeconomic backgrounds are disproportionately likely to be burdened by their student loan payments, either because they are less likely to have completed a degree, because the returns on the degree obtained are lower, or because they lack a financial safety net to help them manage the payments if the degree does not pay off.

Similar differences also emerge based on the race and ethnicity of respondents. Black and Hispanic borrowers are much more likely than white borrowers to be behind on their loan, and are less likely to have completely repaid their loan (figure 33). The divergence of student loan repayment rates by race and ethnicity suggests that the burden of unmanageable student loan debt may be of greater concern, on average, among individuals who are black or Hispanic than it is for white individuals. This too may be the result of either differences across races and ethnicities in respondents' socioeconomic or educational backgrounds, in their postsecondary educational experiences, or in the wages received for a given credential that then influence their ability to repay student loans.

In addition to differences in loan repayment rates by the level of education and socioeconomic backgrounds of borrowers, one may expect that the type of institution attended could affect the ability to repay student loans. The survey observes that borrowers who attended for-profit institutions are more likely to report being behind on student loan payments than those who attended public or nonprofit schools (table 32). While 7 percent of students who attended a public institution are behind on their student loan payments, 21 percent of those who attended a for-profit institution report that they are behind.

Table 32. Payment status of student loans acquired for own education (by institution type)
Percent

Institution type	Currently owe education debt, behind	Currently owe education debt, not behind	Paid off loans
Public	6.6	49.2	44.2
Private not-for-profit	4.6	42.4	53.0
Private for-profit	21.4	52.8	25.8
Overall	9.5	47.0	43.5

Note: Among respondents who borrowed to pay for their own education.

This lower repayment performance for students who attended for-profit institutions may be partially attributable to differences in the rate of return across education sectors.⁴⁶ However, just as degree completion is closely related to the socioeconomic and demographic backgrounds of students, students attending for-profit institutions are disproportionately likely to be first-generation college students or minority students and are less likely to complete their degree. Over 95 percent of respondents who attended for-profit institutions went to either part-time/two-year institutions or to institutions classified by the Carnegie Classification™ as having inclusive admissions criteria. In contrast, over half of students attending nonprofit or public institutions went to schools with selective or more-selective admissions criteria.

In order to assess whether the differences in payment status between attendees of for-profit, nonprofit, and public institutions are simply due to differences in their selectivity, the student loan payment status of respondents who attended for-profit schools can be compared to that of students who attended two-year or inclusive public or nonprofit institutions, excluding those who attended selective or more selective public or nonprofit schools. (A similar comparison was considered for the value of degrees in the "Higher Education and Human Capital" section of this report). When doing so, the gap between public, nonprofit, and for-profit institutions shrinks but does not disappear completely. Twelve percent of students who borrowed to attend a two-year or inclusive public or nonprofit institution report that they are behind on their student loans. While this is a higher rate of being behind on loans than that seen for all students attending public or nonprofit institutions, it remains below the 21 percent of students who borrowed to attend a for-profit institution that are behind.

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