Student Loan Debt: Who is Paying it Down?

JPMorgan Chase Institute, 2020

41 Pages Posted: 2 Dec 2020

See all articles by Diana Farrell

Diana Farrell

JP Morgan Chase & Co. - JP Morgan Chase Institute

Fiona Greig

JPMorgan Chase Institute

Daniel M Sullivan

JPMorgan Chase Institute

Date Written: October 1, 2020

Abstract

American families carry more than $1.5 trillion in student loan debt. This debt provided many with the opportunity to pursue higher education, but remains for others a large, potentially crippling, financial burden. In this report, we explore how people of different socioeconomic groups are managing their student debt. We do this by linking administrative banking data, credit bureau records, and public records on race and ethnicity to create a unique data asset that includes the income, demographics, debt balances, and student loan payments of 301,583 individuals. In general, we find that borrowers of socioeconomic groups tend to manage student loans quite differently, often relying heavily on others—children, parents, and spouses—in order to manage their debt. In particular, we find that while the median borrower is not unduly burdened by their debt, a significant minority of lower-income and younger borrowers are heavily burdened, required to make payments that constitute more than 10 percent of their take-home income. We also find that almost 40 percent of those involved in student debt repayment are making payments on other people’s loans, with 27 percent of those involved holding no student debt whatsoever. These outside helpers play a key role in helping borrowers make progress on their loan. Nevertheless, we find that low-income and older borrowers are more likely to be several months behind on their payments, and 7 percent of all borrowers not in deferral are on track to never pay off their loans. These dynamics of repayment put Black borrowers at a disadvantage, who, relative to White borrowers, have lower incomes and higher debt balances and are 4 times as likely to have no payments made against their loans, partly due to the fact that they are less likely to receive repayment help. This debt provided many with the opportunity to pursue higher education with commensurate income keeping debt burdens at reasonable rates. For others, student loan debt remains a large financial burden relative to income. In this report, we explore how people of different socioeconomic groups are managing their student debt.

Keywords: student debt, higher education, student loans, higher education finance

JEL Classification: I22, I23, I24, I28, D63, J15

Suggested Citation

Farrell, Diana and Greig, Fiona and Sullivan, Daniel M, Student Loan Debt: Who is Paying it Down? (October 1, 2020). JPMorgan Chase Institute, 2020, Available at SSRN: https://ssrn.com/abstract=3714876

Diana Farrell (Contact Author)

JP Morgan Chase & Co. - JP Morgan Chase Institute ( email )

New York, NY
United States

Fiona Greig

JPMorgan Chase Institute ( email )

Washington, DC
United States

Daniel M Sullivan

JPMorgan Chase Institute ( email )

601 Pennsylvania Avenue NW
Washington, DC 20004
United States

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