Board of Governors of the Federal Reserve System

Student Loans

Education debt is prevalent among people who went to college, and especially among younger adults. In 2021, many student loan borrowers continued to receive delays in payment due dates for student loan bills because of ongoing pandemic relief measures. Consequently, the share of borrowers from a range of backgrounds who were behind on their payments in the fall of 2021 declined relative to before the pandemic. Additionally, borrowers who had outstanding student loan debt at the time of the survey reported higher levels of financial well-being compared with prior years.

Incidence and Types of Education Debt

Thirty percent of all adults—representing 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 22 percent who borrowed but fully 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 39).⁵³

The incidence of education debt varied by the type of institution attended. Among those who attended public institutions, 40 percent either previously held debt or currently had debt at the time of the survey, compared with 57 percent of those who attended private not-for-profit and 59 percent who attended private for-profit institutions. 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-six 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 21). This includes 19 percent who borrowed with credit cards, 4 percent with a home equity loan, and 11 percent with some other form. Collectively, 24 percent of borrowers had one or more forms of education debt besides student loans for their own education.

Table 21. Type of education debt

Most student loan borrowers owe less than $25,000 on their loans. The median amount of education debt in 2021 among those with any outstanding debt for their own education was between $20,000 and $24,999. One-quarter of student loan borrowers had less than $10,000 in outstanding student debt (figure 40). Student debt balances vary across different demographic groups. Borrowers with an income of less than $50,000 a year were more likely to carry lower balances of student loan 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 4 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 Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and subsequent executive orders in response to COVID-19 provided federal student loan payment relief throughout 2021, dramatically reducing the share of borrowers who were behind on their payments.⁵⁴ Among adults with outstanding debt from their own education, 12 percent were behind on their payments in 2021, a significant decline from the 17 percent who were behind in the fall of 2019, before the pandemic.⁵⁵

Consistent with previous years, borrowers with less education were more likely to be behind on their payments. Twenty-three percent of borrowers with loans outstanding who completed less than an associate degree reported being behind.⁵⁶ Among borrowers with an associate degree, 18 percent were behind. The delinquency rate was even lower among borrowers with a bachelor's degree (6 percent) or graduate degree (5 percent).

Borrowers who said neither of their parents had completed a bachelor's degree were more likely to be behind on their payments than those with a parent who had completed a bachelor's degree. In 2021, borrowers who did not have a parent with a bachelor's degree were almost twice as likely to be behind on their payments as those with a parent who completed a bachelor's degree (table 22). However, the difference in repayment status among these groups has narrowed since the fall of 2019.

Table 22. Behind on student loan payments for own education (by parents' education, race/ethnicity, and institution type)

Difficulties with repayment also vary by race and ethnicity. While Black and Hispanic borrowers were still disproportionately likely to be behind on their debt and were less likely to have completely paid off their student loan debts, these borrowers saw improvements in their repayment status. In 2021, 17 percent of Black borrowers and 18 percent of Hispanic borrowers reported being behind on their student loan debt, compared with 29 and 24 percent in 2019, respectively.

While the percentage of borrowers behind on payments declined over the prior two years, disparities in payment status persist based on the type of institution attended. Twenty-three percent of borrowers who attended for-profit institutions were behind on student loan payments, versus 11 percent who attended public institutions and 7 percent who attended private not-for-profit institutions.

Greater difficulties with loan repayment among attendees of for-profit institutions may partly reflect the lower returns on degrees from these institutions.⁵⁷ Indeed, when accounting for race and ethnicity, parents' education, level of institution (two year or four year), and institution selectivity, the relationship between for-profit institution attendance and being behind on student loan payments persists. This suggests that the high payment difficulty rates for attendees of for-profit institutions reflect characteristics of the schools and is not simply due to the characteristics of their students.

Although it is common to focus only on those with outstanding debt, many people who borrowed for their education had repaid their loans completely. Excluding these people who have paid off their debt could overstate difficulties with repayment. Indeed, the share of adults who were behind on their payments is much lower when accounting for all who ever borrowed, including those who had completely repaid that debt.

Among those who ever incurred debt for their education, 6 percent were behind on their payments at the time of the 2021 survey, 42 percent had outstanding debt and were current on their payments, and 52 percent had completely paid off their loans. Nevertheless, the demographic and educational characteristics of those who fall behind on payments remain similar when also incorporating those who have paid off their loans.

Relation to Financial Well-Being

Consistent with the student loan payment relief and improvements in payment statuses, self-reported financial well-being among adults with outstanding debt has increased over the pandemic. Among all adults who went to college and had outstanding student loan debt, 73 percent were doing at least okay financially in 2021. This is up from 65 percent who were doing at least okay financially in 2019.

The improvement in financial well-being among student loan borrowers occurred among borrowers of all education levels. The 65 percent of borrowers with an associate degree who reported doing at least okay financially in 2021 was up 9 percentage points from the 56 percent who were doing at least okay in 2019 (table 23). Among borrowers with some college education but no associate degree, the improvement was 7 percentage points. Among those with at least a bachelor's degree, the improvement in financial well-being was 6 percentage points.

Table 23. At least doing okay financially (by education and debt status)

In contrast, adults who attended college and either did not borrow or had already repaid their student loan debts did not exhibit similar improvements in financial well-being. For those with an associate degree who never borrowed, 83 percent were doing okay financially in 2021, as were 76 percent of those who borrowed and paid off their debt. Each of these were similar to or below the shares doing at least okay in 2019, standing in contrast to the improvements seen among those with outstanding loans. This suggests that the changes in student loan policies likely contributed to the increase in self-reported well-being among borrowers.

Relation to Self-Assessed Value of Higher Education

The self-assessed value of higher education was lower among those who had outstanding debt. Among borrowers with outstanding debt, 40 percent said the benefits of their education exceeded the cost. This was below the 63 percent of borrowers who completely paid off their debt and 51 percent of those who went to college but never had debt.⁵⁸ Student loan borrowers with outstanding debt also were twice as likely as those who repaid their debt to say that the costs of their education outweigh the benefits.

These gaps in perceptions of one's higher education were particularly notable among those who completed a degree. Approximately 3 in 10 adults who attended college but did not complete an associate or bachelor's degree said that the benefits of their education exceeded the costs, regardless of their student loan status. However, substantial gaps in perceptions of higher education emerged for those who completed a degree. Just over 3 in 10 associate degree recipients with outstanding debt said that the benefits exceeded the costs, compared with half of those without outstanding debt. Among bachelor's degree recipients, the gap in perceptions between those with and without outstanding student loan debt is even greater (figure 41). This gap indicates the extent to which perceptions of higher education are linked to whether individuals had to borrow for their education, and whether the returns on their education were sufficient for them to repay their student loans.

 

References

 53. Student loan borrowing has declined since its peak in 2010–11 but remains substantially above the levels from the mid-1990s. (Jennifer Ma and Matea Pender, Trends in College Pricing and Student Aid 2021(New York: The College Board, 2021), https://research.collegeboard.org/pdf/trends-college-pricing-student-aid-2021.pdf). Return to text

 54. 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 payment pause for federal student loan borrowers has been extended multiple times by executive orders during the COVID-19 pandemic through all of 2021 and into 2022. (See U.S. Department of Education at https://studentaid.gov/announcements-events/coronavirus). Return to text

 55. Borrowers could be behind on payments for student loans or other types of debt for their own education. Although the federal student loan pause has been in effect since March 2020, findings from the 2020 survey did not show substantial improvement in student loan repayment status among borrowers. This could be due to the uncertainty regarding the policy and interpretation of the survey questions. Data from the Federal Reserve Bank of New York show a decline in student loan delinquency in 2020 and 2021 (Federal Reserve Bank of New York, Quarterly Report on Household Debt and Credit (New York: FRB New York, November 2021), https://www.newyorkfed.org/medialibrary/interactives/householdcredit/data/pdf/HHDC_2021Q3.pdf). Return to text

 56. Currently enrolled students are frequently not required to make payments so are less likely to fall behind. Among those with less than an associate degree who are not currently enrolled, a larger 28 percent of borrowers are behind. Return to text

 57. 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, https://www.aeaweb.org/articles?id=10.1257/jep.26.1.139, for a discussion of the rates of return by education sector. Return to text

 58. Differences in the level of education within these debt status groups also contribute to the self-assessment of costs and benefits. Those with a bachelor's degree or higher make up 71 percent of those who attended college and previously had debt, compared with 42 percent of those who attended and never had debt. Return to text

* The Federal Reserve adjusted this report on February 2, 2023. “Acquired debt for own education, including repaid debt (by age and highest degree completed),” were adjusted to match the figure values. “Self-assessed value of higher education (by education and debt status),” was corrected from “Among adults ages who borrowed for their own education” to “Among adults who attended college.”