Who really owes $1.6 trillion of student loan debt? It’s not who you think.
Here’s what you need to know.
The latest student loan debt statistics show that 45 million borrowers collectively owe more than $1.6 trillion in student loan debt. However, these headline statistics miss the details of who really owes these student loans. Let’s breakdown the latest Brookings research and Federal Reserve data of federal student loans, which account for more than 90% of all outstanding student loans:
1. Highest income-earners owe the most student loan debt
- Highest-income households: owe 60% of outstanding student loan debt and make about 75% of all student loan payments.
- Lowest-income households: owe less than 20% of outstanding student loan debt and make only of student loan payments.
This data reflects economic realities that those with a college degree earn more income and those with higher income are able to make more student loan payments. Lower-income student loan borrowers may be enrolled in an income-driven repayment plan, which could lower their student loan payment to as low as $0 per month.
2. Very few people owe more than $100,000 of student loan debt
- Only 6% of borrowers owe more than $100,000 in student loan debt.
- Only 2% owe more than $200,000.
- Approximately 18% of borrowers owe less than $5,000 in student loan debt, which represents 1% of all student loan debt.
3. Most student loan debt is for graduate school
- Most student loan debt is from graduate school, not college.
- The latest data shows that 56% of student loan debt comes from graduate school.
- Of the 56%, approximately 36% hold a master’s degree and 30% hold a professional or doctoral degree.
- Typically, although not always, borrowers with a graduate or professional degree earn more income than a borrower with only a college degree.
- Those who attend graduate school tend to be more financially secure
The latest Federal Reserve data suggests that student loan debt is most concentrated among higher income earners who hold graduate degrees. This doesn’t mean that low income borrowers are not burdened by student loan debt or face financial struggle; many do. At the same time, the impact of Covid-19 advanced financial struggles for millions of Americans, which has included lost wages, job and healthcare. Brookings suggests that proposals for broad student loan forgiveness or to cancel student loan debt should be thoughtful in terms of who they target. There is also the underlying issue of educational opportunity, including who has access to attend college and graduate school.
According to Brookings, however, “these updated statistics provide an important reminder that broad policies to forgive student debt across the board or to waive monthly payments will not effectively address the acute problems facing those most affected by the pandemic, many of whom were in the most precarious situations even before this crisis. Instead, they will exacerbate the long-term trend of economic inequality between those who have gone to college or graduate school and those who have not.”
Pay off student loans
Know your options to pay off student loans. Here are some options to consider, all of which have no fees: