Board of Governors of the Federal Reserve System

Student Loans and Other Education Debt

Fifty-four percent 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 2018, 2 in 10 of those who still owe money are behind on their payments—little changed from the prior year. Individuals who did not complete their degree or who attended a for-profit institution are more likely to struggle with repayment than those who completed a degree from a public or private not-for-profit institution, even including those who took on a relatively large amount of debt. 

Overview

Forty-three percent of those who attended college, representing 30 percent of all adults, have incurred at least some debt for their education. This includes 22 percent of college attendees who still owe money and 21 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 29).²³

Many forms of debt finance education. Student loans are by far the most common form, held by 93 percent of those with their own education debt outstanding. In addition, 31 percent have some other form of debt for their education, including 24 percent who have borrowed with credit cards, 7 percent with a home equity line of credit, and 12 percent with some other form (table 25). The typical amount of education debt in 2018 among those with any outstanding was between $20,000 and $24,999.²⁴

Nearly 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 $299 per month.

Table 25. Type of education debt (by whose education funded)

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, 3 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 25).

Student Loan Payment Status

Among those with outstanding student loans from their own education, 2 in 10 adults are behind on their payments. Those who did not complete their degree are the most likely to be behind. Thirty-seven percent of adults with college student loans outstanding, not enrolled, and less than an associate degree are behind. This compares to 21 percent of borrowers with an associate degree. The delinquency rate is even lower among borrowers with a bachelor's degree (10 percent) or graduate degree (6 percent).

Perhaps counterintuitively, those with more debt are not more likely to have difficulty with repayments. This is likely to be the case because the level of education, and the associated earning power, generally rise with debt levels. Eighteen percent of borrowers with less than $10,000 of outstanding debt, and 22 percent of those with between $10,000 and $24,999 of debt, are behind on their payments. Among those with $100,000 of debt or more, 16 percent are behind on payments.

Among those who ever incurred debt for their education, including those who have completely repaid that debt, 10 percent are currently behind on their payments, 43 percent have outstanding debt and are current on their payments, and 48 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.²⁵ Among borrowers under age 30, first-generation college students are more than twice as likely to be behind on their payments as those with a parent who completed a bachelor's degree (figure 30).

Difficulties with repayment also vary by race and ethnicity. Black and Hispanic education borrowers are more likely than white borrowers to be behind on their loan repayment and are also less likely to have repaid their loans (figure 31). These patterns partly reflect differences in rates of degree completion, wages, and family support.

Repayment status also differs by the type of institution attended. Over one-fifth of borrowers who attended private for-profit institutions are behind on student loan payments, versus 8 percent who attended public institutions and 5 percent who attended private not-for-profit institutions (table 26).

Table 26. 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.²⁶ It could also relate to differences in the aptitude and educational preparation of students across institutions, which in turn could affect earnings potential and repayment ability.

 

References

 

 23. 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), https://trends.collegeboard.org/sites/default/files/2017-trends-student-aid.pdf). Return to text

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

 25. 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

 26. 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