Board of Governors of the Federal Reserve System

Higher Education and Student Loans

Education is widely recognized as a path to higher income and greater financial well-being, and most adults who attended college feel that the investment paid off. However, some groups—including those who started college but did not complete their degree and those who attended private for-profit institutions—had less favorable assessments. Additionally, student loans continue to relate to people's perceptions of the returns to their education as they evaluate whether their educational choices improved their financial well-being.

Educational Attainment

Most adults have enrolled in at least some post-secondary education. Seventy percent of adults have ever enrolled in an educational degree program beyond high school, whereas just under one-half have received at least a certificate or technical degree, and 36 percent have received at least a bachelor's degree. However, consistent with increasing rates of college attendance over time, the share of adults who have ever enrolled in a degree program after high school was higher for younger adults than for older adults (table 32).⁴² College attendance rates also vary substantially by race and ethnicity, with Hispanic adults being much less likely than others to have ever attended college, while Asian adults were more likely than average to have attended college.

Table 32. Educational attainment (by age, race/ethnicity, and parental education)

The likelihood of obtaining a college degree was higher among those whose parents were college graduates. Among adults who have at least one parent with a bachelor's degree, 64 percent received a bachelor's degree themselves. In contrast, 19 percent of adults whose parents did not attend college obtained a bachelor's degree.

The type of institution attended also varied with parental education, race, and ethnicity. Most adults who attended college went to public institutions (71 percent), while just less than one-fourth attended private nonprofit schools and 5 percent attended private for-profit schools.⁴³ Although for-profit schools comprised a relatively small share of the higher education attendance for students of a range of backgrounds, adults whose parents did not attend college were somewhat more likely to attend a for-profit institution than those who have a parent with a bachelor's degree—7 percent compared with 3 percent. Additionally, 12 percent of Black adults and 7 percent of Hispanic adults who went to college attended for-profit schools.⁴⁴

Overall Value of Higher Education

Consistent with higher rates of financial well-being among those who have more education discussed in the "Overall Financial Well-Being" section of this report, just more than one-half of adults who went to college said that the lifetime financial benefits of their higher education exceeded the financial costs. Meanwhile, just above one-fifth said that the costs are higher. The rest saw the benefits as about the same as the costs. These self-assessments of the financial value of education have changed little in recent years.

The self-assessed value of higher education, while generally positive, depends on several aspects of a person's educational experience. In particular, those who completed their program and received a degree were more likely to see net benefits than those who did not complete a degree. Among those who went to college but did not complete at least an associate degree, 30 percent said the benefits of their education exceeded the cost. This fraction jumped to 42 percent of those with an associate degree and 68 percent of those with at least a bachelor's degree.

In addition to varying by level of education, the self-assessed value of higher education also generally increased with age. Among those who completed at least an associate degree, those who are age 45 and older had more positive assessments of the value of their education than those under age 45 who completed the same level of education (figure 28).⁴⁵ These shifting views on the benefits of college may reflect that older respondents have had a longer time to experience the benefit of higher earnings based on their education compared with younger respondents. It may also be driven by the rising costs of higher education and the increased use of student loans, which make costs remain more salient into adulthood.⁴⁶

Reflecting the potential importance of student loans to perceptions of higher education, 43 percent of adults with outstanding student loans from their own education said the financial benefits of their higher education exceeded the costs. By comparison, 53 percent of adults who had completely paid off their student loans or who went to college but never had debt said the benefits of their education exceeded the cost.

The type of institution attended also was related to differences in how people viewed their education. Fifty-three percent of those who attended public institutions and 58 percent of those who attended private nonprofit institutions saw the financial benefits of their educational as greater than their costs. However, a far lower 31 percent of those who attended for-profit institutions felt their education was worth the cost.

Look Back on Education Decisions

Another way to assess the financial value of education is to consider what people would have done differently if given the chance. Most people valued the education they received, but with the benefit of hindsight and life experience, it was also common to think that different educational decisions could have been better. This provides an additional way to explore how people's views on their educational investments relate to their current financial well-being.

Of those with lower levels of education, the most common change that people would make would be completing more education.⁴⁷ Forty-seven percent of adults who attended college (and either completed at least an associate degree or were not currently enrolled) said that they would have completed more education in hindsight. Sixty-four percent of those who had less than a bachelor's degree would have completed more education as would 32 percent of those who completed at least a bachelor's degree. A far smaller 9 percent of people who went to college said that they would have completed less education or not gone to college if they could make their education decisions again.

Of those with lower levels of education, the most common change that people would make would be completing more education.

Additionally, reassessments of educational decisions varied by the type of institution attended. Forty-eight percent of those who received a bachelor's degree from a for-profit institution said they would have attended a different school in hindsight, compared with 24 percent of those who received their bachelor's degree from a private nonprofit institution and 20 percent who received their bachelor's degree from a public institution.⁴⁸ This difference remains even after accounting for the selectiveness of the institution, level of education completed, the parents' level of education, and demographic characteristics of the student.⁴⁹

Of those adults who completed at least some college, the changes they would have made to their educational decisions were also related to the type of educational program they completed most recently.⁵⁰ Those whose most recent program was in engineering, computer or informational sciences, or health were the least likely to say they would have chosen a different field (figure 29).⁵¹ Many adults who studied any of the fields considered still value the education they have, though views on the benefits of education vary along similar lines. For example, 72 percent of those who studied engineering said the financial benefits of their education exceeded the cost—the highest share of any field considered.

Incidence and Types of Education Debt

Many people finance their education by taking on debt. Thirty percent of all adults—representing more than 4 in 10 people who went to college—said they took out student loans for their education.⁵² This includes 21 percent of college attendees who still owed money on outstanding loans ("student loan borrowers") and 21 percent who borrowed but fully repaid their education debts.

The share of adults who took out student loans for their education varied across age groups. Adults ages 30 to 44 were most likely to have taken out student loans for their education, while older adults were less likely to do so, consistent with the upward trend in educational borrowing over the past several decades (figure 30).⁵³ Adults under age 30 were also less likely to have taken out student loans than adults ages 30 to 44, potentially because many young adults have not yet completed their education. Consistent with this, adults who completed higher levels of education were more likely to have taken out student loans than those who completed lower levels of education.

Most student loan borrowers with outstanding debt owed less than $25,000 on their own educational loans. The median amount of education debt in 2022 among those with any outstanding debt for their own education was between $20,000 and $24,999. Just above one-fourth of student loan borrowers had less than $10,000 in outstanding student debt from their own education.

Student debt balances also varied across different demographic groups. Borrowers with lower levels of education were more likely to carry lower balances of student loan debt. Black borrowers were more likely to carry higher balances on student loan debt (figure 31).

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 in 2022, compared with 56 percent of those who attended private nonprofit and 65 percent who attended for-profit institutions.

Some people also took out student loans to assist family members with their education through either a co-signed loan with the student or a loan taken out independently. Although this was less common than borrowing for one's own education, 6 percent of adults had student loans that paid for a child's or grandchild's education. The median amount of debt held for a child or grandchild's education was between $15,000 and $19,999.

Student Loan Payment Status

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and subsequent executive orders in response to COVID-19 paused payments on federal student loans beginning in 2020.⁵⁴ As a result, most adults with outstanding student loans were not required to make monthly payments on their student loans at the time of the survey.

Fifteen percent of borrowers with debt from their own education reported that they were behind on payments or in collections for one or more of their student loans. Borrowers with less education or lower income were more likely to be behind on their student loan payments. Twenty-eight percent of borrowers with loans outstanding who completed less than an associate degree reported being behind, as did 25 percent of borrowers earning less than $25,000 (table 33).⁵⁵

Table 33. Behind on student loan payments (by family income and education)

Difficulties with student loan payments also varied by the type of institution attended. Three in 10 borrowers who attended for-profit institutions were behind on student loan payments, compared with 11 percent who attended public institutions and 7 percent who attended private nonprofit institutions.

Although discussions of student loans frequently consider only those with outstanding debt, many people who borrowed for their education had repaid their loans completely. Excluding people who have paid off their debt could overstate the share people who borrowed who had difficulties with repayment. Indeed, the share of adults who were behind on their payments was 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, 8 percent were behind on their payments at the time of the 2022 survey, 43 percent had outstanding debt and were current on their payments, and one-half had completely paid off their loans. Nevertheless, the demographic and educational characteristics of those who were behind on payments remain similar when also incorporating those who had paid off their loans.

 

References

 

 42. Though college enrollment rates among recent high school completers peaked at about 70 percent in 2009 and have since stagnated or fallen, enrollment rates remain historically high, averaging more than two-thirds of recent high school completers from 2010–19 compared with 45 percent in 1960 (see the National Center for Education Statistics web site at https://nces.ed.gov/programs/digest/d21/tables/dt21_302.20.asp). College enrollment declined to 63 percent in 2020 amid the pandemic. Return to text

 43. Individuals do not self-report the type of institution in the survey. Instead, the institution type is assigned by matching the name and location of the college reported by the individual with data from the Center on Postsecondary Research at the Indiana University School of Education (https://cpr.indiana.edu/). For individuals who completed an associate or bachelor's degree, institution type is based on the school from which they received the degree. For other individuals, it is based on the last school attended. Return to text

 44. William R. Emmons and Lowell R. Rickets, "College Is Not Enough: Higher Education Does Not Eliminate Racial and Ethnic Wealth Gaps," Federal Reserve Bank of St. Louis Review 99, no. 1 (2017), 7–40 found significantly different wealth outcomes between racial and ethnic groups within the same education level, which could not be explained by observable characteristics such as age, family structure, financial decisionmaking, or luck. While likely not fully explaining the gap, one characteristic that could contribute to these differences in wealth returns to education across racial and ethnic groups is the type of school attended, since students' outcomes vary significantly between for-profit schools and other colleges. Return to text

 45. A similar age profile is not observed for those who have not yet completed a degree, although this is because currently enrolled students who have not yet completed a degree generally have positive assessments of the value of their education. When restricting to those who are not enrolled, non-completers age 45 and older are more likely to say that their education produced net financial benefits than are younger non-completers (29 percent and 18 percent say the benefits exceed the cost, respectively). Return to text

 46. From 1995 to 2015, the average net tuition, fees, room, and board rose 54 percent at public four-year institutions and 29 percent at private, nonprofit, four-year institutions. However, the average net tuition, fees, room, and board at both public and nonprofit institutions declined from 2015 to 2022. See College Board, Trends in College Pricing 2014, https://research.collegeboard.org/pdf/trends-college-pricing-2014-full-report.pdf and College Board, Trends in College Pricing and Student Aid 2022, https://research.collegeboard.org/media/pdf/trends-in-college-pricing-student-aid-2022.pdf. Return to text

 47. The questions about changes to education are asked of people who completed at least some higher education and either completed their associate or bachelor's degree or are no longer enrolled. Return to text

 48. These results are similar if those who completed less than a bachelor's degree are included. Return to text

 49. Selectiveness is based on definitions from "The Carnegie Classification of Institutions of Higher Education," web page, http://carnegieclassifications.iu.edu/. Return to text

 50. These results are consistent with research that financial returns to education vary by field of study. See, for example, Douglas A. Webber, "The Lifetime Earnings Premia of Different Majors: Correcting for Selection Based on Cognitive, Noncognitive, and Unobserved Factors," Labour Economics 28 (June 2014): 14-23; and Joseph G. Altonji and Seth D. Zimmerman, "The Costs of and Net Returns to College Major," in Productivity in Higher Education, ed. Caroline M. Hoxby and Kevin Stange (Chicago: University of Chicago Press, 2019), 133–176. Return to text

 51. Each category of educational programs may contain multiple fields of study, so it is possible that some respondents who said they would choose a different field of study in hindsight would not change their educational program. Additionally, respondents are asked to identify the educational program for their most recent degree, whereas the question about changing fields of study in hindsight asks respondents about undergraduate degrees. Because of this, these questions do not ask about the same degree program for people with more than a bachelor's degree. However, these findings do not substantially change when people with more than a bachelor's degree are excluded. Return to text

 52. Respondents were asked about their student loan debt as of July 2022, before the Department of Education's August 24 announcement of a policy to forgive $10,000 or $20,000 in federal student loan debt for most borrowers (see U.S. Department of Education, "Biden-Harris Administration Announces Final Student Loan Pause Extension Through December 31 and Targeted Debt Cancellation to Smooth Transition to Repayment," news release, August 24, 2022, https://www.ed.gov/news/press-releases/biden-harris-administration-announces-final-student-loan-pause-extension-through-december-31-and-targeted-debt-cancellation-smooth-transition-repayment). For more information on how people expected to use any potential student loan forgiveness, see box 1. Return to text

 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 2022(New York: The College Board, 2021), https://research.collegeboard.org/media/pdf/trends-in-college-pricing-student-aid-2022.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 was extended multiple times by executive orders during the COVID-19 pandemic and was in place at the time of the 2022 survey. (See U.S. Department of Education, "COVID-19 Emergency Relief and Federal Student Aid," https://studentaid.gov/announcements-events/covid-19.) Federal student loans account for most student loans (see Education Data Initiative web page, https://educationdata.org/student-loan-debt-statistics). Borrowers with private student loans were still required to make monthly payments. Return to text

 55. A small number of individuals who reported that they have student loans from their own education but are not enrolled in college and reported no education beyond high school are excluded from these results. Currently enrolled students are frequently not required to make payments, so they are less likely to fall behind. Among those with less than an associate degree who are not currently enrolled, a larger 34 percent of borrowers are behind. Return to text