Board of Governors of the Federal Reserve System

Student Loans

Many adults who went to college took on some debt for their education, and younger adults were more likely to have taken out student loans or incurred other education-related debt. Although repayment of this debt can be challenging, many student loan borrowers received reductions or delays in payment due dates for student loan bills since the start of the COVID-19 pandemic in March 2020. Furthermore, a sizeable share were not required to make payments on their student loans before the onset of the pandemic, often because they were still enrolled in school.

While recognizing that delays and forgiveness of student loan bills may reduce the share who have missed payments, there was little change in the share of borrowers who were behind on their payments in 2020. 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 who had outstanding student loan debt at the time of the survey reported lower levels of financial well-being across several dimensions.

Incidence and Types of Education Debt

Thirty percent of all adults—representing just over 4 in 10 people who went to college—said they incurred at least some debt for their education. This includes 20 percent of college attendees who still owed money and 20 percent who had already repaid their education debts. Adults under age 30 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 33).⁴³

The incidence of education debt varied by the type of educational institution. Among those who attended public institutions, 38 percent either previously held debt or currently had debt at the time of the survey, compared with 53 percent of those who attended either private not-for-profit or private for-profit institutions.⁴⁴ Among younger cohorts of students, those who attended private for-profit institutions were also more likely to have taken out student loans than those who attended either private not-for-profit or public institutions.

Not all education debt is in the form of student loans. Ninety-five percent of those with outstanding debt from their own education had student loans, but many borrowers had other forms of education debt as well (table 20). This includes 21 percent who borrowed with credit cards, 4 percent with a home equity line of credit, and 12 percent with some other form. Collectively, 26 percent of borrowers had at least one form of education debt besides student loans. The median amount of education debt in 2020 among those with any outstanding debt for their own education was between $20,000 and $24,999.⁴⁵

Table 20. Type of education debt

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 common 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. Like 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.

Student Loan Payment Status

The pandemic dramatically altered repayment requirements for many student loans. Before the onset of the pandemic, just under 3 in 10 adults with outstanding education debt for their own education were not required to make payments. Traditionally, these deferments were for reasons such as still being enrolled in school. However, provisions in the CARES Act and subsequent executive orders in response to COVID-19 substantially expanded student loan payment relief.⁴⁶ As a result of these provisions, 60 percent of borrowers with debt from their own education either were not required to make payments before the pandemic or were receiving at least some student loan payment relief at the time of the survey.

Among those with outstanding debt from their own education, 18 percent were behind on their payments. Those who did not complete a degree were the most likely to be behind. Thirty-one percent of adults who had education loans outstanding and who had less than an associate degree reported being behind. This compares to 22 percent of borrowers with an associate degree. The delinquency rate was even lower among borrowers with a bachelor's degree (9 percent) or graduate degree (8 percent).

Borrowers with additional debt generally had higher levels of education. Among those with over $15,000 of education debt, two-thirds had at least a bachelor's degree and more than one-third had a graduate degree. This compares to the one-third of those with smaller amounts of outstanding debt who had at least a bachelor's degree.

Likely because education levels, and associated earning power, are generally higher among those with more debt, borrowers with the least debt often had somewhat more difficulty with repayments. Twenty-one percent of borrowers with less than $15,000 of outstanding debt were behind on their payments, compared with 17 percent of those with $15,000 of debt or more.

Although it is common to focus only on borrowers with outstanding debt, many people who borrowed for their education had repaid their loans completely. Excluding these borrowers who have paid off their debt could overstate difficulties with repayment. The remainder of this section therefore considers the repayment status of all borrowers, including those who had completely repaid their loan.

The share of adults who were behind on their payments is much lower when accounting for all borrowers, including those who had 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, 42 percent had outstanding debt and were current on their payments, and 49 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 about three times as likely to be behind on their payments as those with a parent who completed a bachelor's degree (figure 34).

Difficulties with repayment also varied by race and ethnicity. Young Black and Hispanic borrowers were disproportionately likely to be behind on their debt and were less likely to have completely paid off their student loan debts (figure 35). Young Asian borrowers were less likely to be behind on their payments and the most likely to have paid off their loans. These patterns partly reflect differences in rates of degree completion, institutions attended, and wages for a given educational credential (see the "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. More than one-fourth of borrowers who attended for-profit institutions were behind on student loan payments, versus 10 percent who attended public institutions and 5 percent who attended private not-for-profit institutions (figure 36).

Greater difficulties with loan repayment among attendees of for-profit institutions may partly reflect the lower returns on degrees from these institutions.⁴⁷ Indeed, when accounting for race and ethnicity, first-generation status, and institution selectivity, the relationship between for-profit institution attendance and student loan default persists. 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 report lower levels of financial well-being than do similar adults who do not have outstanding debt. However, payment-relief measures in response to the pandemic appear to have bolstered the financial well-being of those who received relief from these payments.

Among adults with the same level of education, those who currently held student loan debt were less likely to say they are doing okay financially. This is consistent with patterns seen in earlier years. For example, while 80 percent of bachelor's degree recipients ages 18 to 39 with outstanding education debt were at least doing okay financially, this is less than the 92 percent of similarly educated adults in this age range who previously had debt and the 93 percent of those who never had debt who said that they were at least doing okay (table 21).

Table 21. Well-being measures (by education and receipt of student loan relief)

Young adult borrowers who were receiving student loan relief from the CARES Act and subsequent executive orders appeared to be doing better off financially than borrowers who were not. Among adults with at least a bachelor's degree who had student loans, 82 percent of those currently receiving payment reductions or delays in payments were doing at least okay financially. This contrasts with 77 percent of those with student loans who were not receiving payment relief at the time of the survey who were doing at least okay financially.

 

References

 

 43. 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 CJ Libassi, Trends in Student Aid 2019(New York: The College Board, 2019), https://research.collegeboard.org/pdf/trends-student-aid-2019-full-report.pdf). Return to text

 44. Students who attend for-profit institutions account for a disproportionate share of education debt, including both count 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, http://libertystreeteconomics.newyorkfed.org/2016/09/the-changing-role-of-the-community-college-and-for-profit-college-borrowers-in-the-student-loan-mark.html, for a discussion of trends in federal student loan borrowing by institution type. Return to text

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

 46. Beginning on March 27, 2020, the CARES Act granted relief to student loan borrowers by temporarily pausing payments—including principal and interest—on federally held student loans. This pause was scheduled to expire on September 30, 2020, but an extension of the forbearance through December 31, 2020, was directed in a memorandum signed by President Trump on August 8, 2020. On December 4, 2020, the Department of Education announced that it would extend the relief provided by the presidential memorandum and the CARES Act until January 31, 2021. On January 20, 2021, President Biden signed an executive order to extend this relief to September 30, 2021 (see https://studentaid.gov/announcements-events/coronavirus). Return to text

 47. 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