Board of Governors of the Federal Reserve System

Student Loans and Other Education Debt

Fifty-five percent of people under age 30 who went to college took on some debt, such as student loans, for their education. Repaying this debt can be challenging. Seventeen percent of those with education debt were behind on their payments in 2019. This share changed little from the 19 percent who were behind in the prior survey. Individuals who did not complete their degree or who attended a for-profit institution were more likely to struggle with repayment than those who completed a degree from a public or not-for-profit institution. Additionally, those with outstanding student loan debt reported lower levels of financial well-being across several dimensions.

Overview

As of late 2019, 43 percent of those who went to college, representing 31 percent of all adults, had incurred at least some debt for their education. This included 22 percent of college attendees who still owed money and 21 percent who already repaid their education debts. Younger cohorts who attended college were more likely to have taken out loans than older adults, consistent with the upward trend in educational borrowing over the past several decades (figure 32).³⁹

The incidence of incurring education debt varied by institution type. Among those who attended public institutions, 40 percent either previously held debt or had outstanding debt, compared with 56 percent of those who attended private not-for-profit institutions and 64 percent of those who attended private for-profit institutions.⁴⁰ This difference in student loan usage across institution types similarly persisted among younger cohorts of students.

Not all education debt was in the form of student loans. Ninety-five percent of those with their own education debt outstanding had student loans, but many borrowers had other forms of education debt as well. This included 23 percent who borrowed with credit cards, 4 percent with a home equity line of credit, and 11 percent with some other form (table 25). Collectively, 28 percent of borrowers had at least one form of education debt besides student loans. The typical amount of education debt in 2019 among those with any outstanding debt from their own education was between $20,000 and $24,999.⁴¹

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

Some people also took out education debt to assist family members with their education (through either 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 owed money for a spouse's or partner's education, and 5 percent had 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 could be in forms other than a student loan (table 25).

Student Loan Payment Status

Most borrowers were required to make payments on their loans in 2019, although some were not. Reasons that payments may not be required included deferments on payments while still enrolled in school. Nearly 3 in 10 adults with outstanding education debt were not required to make payments on their loans in 2019. Of those who were making payments, the typical required monthly payment was between $200 and $299 per month.

Among those with outstanding debt from their own education, 17 percent of adults were behind on their payments. Those who did not complete their degree were the most likely to be behind. Four in 10 adults with outstanding education loans, not enrolled, and less than an associate degree were behind. This compares to 15 percent of borrowers with an associate degree who were behind. The delinquency rate was lower among borrowers with a bachelor's degree (8 percent) or graduate degree (6 percent).

Consistent with previous years of the survey, those with the least debt often had the most difficulty with repayments in 2019. Twenty-one percent of borrowers with less than $15,000 of outstanding debt were behind on their payments, compared with 14 percent of those with $15,000 of debt or more.

The difference in delinquency rates by loan amount was likely because education levels, and the associated earning power, generally rose with debt levels. Among those with over $15,000 of education debt, two-thirds had at least a bachelor's degree and one-third had a graduate degree. This compares to one-third of those with smaller amounts of outstanding debt who had at least a bachelor's degree.

Excluding those who 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 completely repaid their debt. The share of adults who were behind on their payments is much lower when accounting for all borrowers, including those who completely repaid that debt. Among those who ever incurred debt for their education, 9 percent were behind on their payments at the time of the survey, 44 percent had outstanding debt and were current on their payments, and 47 percent had completely paid off their loans.

Borrowers who were first-generation college students were more likely to be behind on their payments than those with a parent who completed college. Among borrowers under age 40, first-generation college students were over twice as likely to be behind on their payments as those with a parent who completed a bachelor's degree (figure 33).

Difficulties with repayment also varied by race and ethnicity in 2019. The share of black and Hispanic borrowers who were behind on their loans was higher than the overall share of borrowers who were behind (figure 34). These patterns partly reflect differences in rates of degree completion, institution type, and wages for a given educational credential (see the "Higher Education" section of this report for additional discussions of these differences by race and ethnicity).

Repayment status also differed by the type of institution attended. Nearly one-fourth of borrowers under age 40 who attended private for-profit institutions were behind on student loan payments, versus 9 percent who attended public institutions and 7 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 degrees from these institutions.⁴² Indeed, when accounting for race and ethnicity, first-generation status and institution selectivity, the relationship between for-profit institution attendance and student loan default persisted. This suggests that the high default rates for attendees of for-profit institutions reflect characteristics of the schools and is not simply due to the characteristics of their students.

Relation to Financial Well-Being

Adults carrying student loan debt reported lower levels of financial well-being than did similar adults without outstanding debt. Among adults with the same level of education, those with outstanding student loan debt were less likely to say they were doing okay financially. For example, three-quarters of bachelor's degree recipients under age 40 with outstanding education debt were at least doing okay financially. But this was less than the 93 percent of similarly educated adults in this age range who previously had debt and said they were at least doing okay, and the 90 percent of those who never had debt and said the same. This trend similarly holds for those with some college, a technical degree, or an associate degree (table 27).

Table 27. Well-being measures (by education and debt status)

Adults under age 40 with education debt were also less likely to feel that their retirement savings were currently on track. Forty percent of adults under age 40 with at least a bachelor's degree who had outstanding education debt felt their retirement savings plan was currently on track. This compares with 56 percent who previously had debt and 55 percent who never had debt.

This pattern also emerges among those who had some college, a technical degree, or an associate degree. That said, progress toward retirement savings was notably lower among those without a bachelor's degree, irrespective of student loan debt levels. There were many possible explanations for this trend. This may reflect an inability to contribute to retirement accounts after meeting monthly student loan obligations. Alternatively, holding student debt may have a substantial influence on prioritization of debt repayment over saving, even if borrowers were able to both meet minimum loan obligations and contribute to retirement accounts.⁴³

 

References

 

 39. 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

 40. Students who attended for-profit institutions account for a disproportionate share of education debt, including both count of borrowers and dollar amount of student loans. See Rajashri Chakrabarti, Michael Lovenheim, and Kevin Morris, "The Changing Role of Community-College and For-Profit-College Borrowers in the Student Loan Market," Federal Reserve Bank of New York Liberty Street Economics (blog), September 8, 2016, for a discussion of trends in federal student loan borrowing by institution type (http://libertystreeteconomics.newyorkfed.org/2016/09/the-changing-role-of-the-community-college-and-for-profit-college-borrowers-in-the-student-loan-mark.html). Return to text

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

 42. 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

 43. See Matthew S. Rutledge, Geoffrey T. Sanzenbacher, and Francis M. Vitagliano, "Do Young Adults with Student Debt Save Less for Retirement?" Center for Retirement Research at Boston College, Issue Brief no. 18-13 (June 2018), https://crr.bc.edu/wp-content/uploads/2018/06/IB_18-13.pdf for a discussion of possible effects of student loans on retirement savings among young people. Return to text