Student Loan Repayment

Abstract

While student loan originations, outstanding balances, and defaults are regularly reported, there are surprisingly few data on the payment patterns of student loan borrowers over the last fifteen years. Steady increases in student loan balances raise concerns as to whether student loan borrowers’ access to other credit products, such as obtaining a mortgage, will be affected in the years to come. Unfortunately, there have been few opportunities to study how quickly consumers have repaid their student loan debt due to a lack of data that allow researchers to see how balances evolve after students leave school.

To learn more about the behavior of student loan borrowers, we analyze data from the Consumer Financial Protection Bureau’s Consumer Credit Panel (CCP). These data contain detailed information on the balances and payment status of the student loans held by de-identified consumers in the panel. In this Data Point, we also show how payments have changed over time for different cohorts of borrowers and how delinquency has changed among cohorts of borrowers who are not paying down the balance on their loans.

Key findings include:

• Holding the amount borrowed constant, student loan borrowers whose repayment period began recently have fully repaid their loans at rates similar to those whose repayment period began fifteen years ago. However, 25 to 30 percent of the borrowers in the older cohorts do not pay off their loans within the standard 10-year repayment period, and the more recent cohorts appear to be following the same trend.

• There is a strong relationship between repayment speed and loan amount which has changed overall payoff rates across cohorts. Borrowers with more than $20,000 in loans, who represented only 20 percent of all student loan borrowers entering repayment 15 years ago, now make up more than 40 percent of all borrowers entering repayment.

• Student loan borrowers are older now than in years past: the share of borrowers younger than 25 fell from 30 percent in the 2002 cohort to 15 percent in the 2014 cohort while the share of borrowers 35 or older almost doubled over this period.

• Among student loan borrowers making large enough payments to reduce their loan balances, the median number of months remaining until full repayment is lower for recent cohorts than for earlier cohorts.

• Meanwhile, the share of borrowers not making payments large enough to reduce their balances has increased, particularly among borrowers with loans smaller than $20,000.

Note: This is another in an occasional series of publications from the Bureau of Consumer Financial Protection’s Office of Research. These publications are intended to further the Bureau’s objective of providing an evidence-based perspective on consumer financial markets, consumer behavior, and regulations to inform the public discourse.