Jason D. Delisle

• Some of the biggest and most consistent changes in student borrowing patterns over the past two ong students from higher-income families.
• In the 201516 academic year, students from higher-income families were just as likely to take on debt for an initial year of an undergraduate education as were students from low-income families.
• Undergraduates from higher-income families take on the largest debts, while those from the lowest-income families take on the smallest debts.
• The share of low-income students earning bachelor’s degrees with debt has been remarkably consistent (75 percent) for 20 years, while the share of high-income students borrowing has doubled to 60 percent.

Observers from across the ideological spectrum argue that the US Escondido bad credit payday loans no credit check lenders is in the midst of a student debt crisis. This view is largely motivated by the fact that student debt now totals $1.5 trillion after rising rapidly in the past decade, particularly during the last economic recession. 1 In 2003, outstanding debt was just $311 billion after adjusting for inflation. 2

These trends have prompted several Democratic presidential candidates to propose that the federal government forgive most or all outstanding student debt (the vast majority of which was issued through federal programs). 3 They argue that the debt is unaffordable for many and is the result of severe inequities in our higher education system. Concern about inequitable student debt extends beyond public policy. A growing number of private employers now repay a share of their employees’ student loans in part out of concern that students from disadvantaged backgrounds are the ones most likely burdened by debt. 4

In light of these loan forgiveness proposals, employer-sponsored benefits, and the broader concerns about rising student debt, understanding who takes on student loans is important. A clearer picture of who borrows will help identify the beneficiaries of broad loan forgiveness proposals and the more limited employer repayment benefits, or any other policy aimed at reducing student debt and repayment obligations. It can also help gauge the extent to which student debt burdens reflect inequities in the US higher education system.

Prior analyses on this topic focus on the demographics of borrowers who currently hold the $1.5 trillion in outstanding debt. For example, researchers at the Urban Institute show that higher-income households hold a disproportionately large share of all student debt. 5 Using different data, the Federal Reserve Bank of New York reports similar findings but also concludes that relative to household earnings, debt is higher among lower-income households. 6

EducationHigher Education

This report takes a different approach to understanding who holds student debt. It examines borrowers’ characteristics when the loans were originated, whereas the studies mentioned above capture borrowers at any point during repayment. Both perspectives are useful, but the former is less common in policy discussions. Moreover, previous research on income characteristics at loan origination appears at odds with data on borrowers in repayment. Some analyses focused on demographics at loan origination conclude that low- and middle-income students are more than twice as likely as other students to have student loans or that high student debt goes hand in hand with low income. 7

To help fill the void in the research, this analysis focuses on borrowing patterns among students who enrolled in an institution of higher education in the 199596 and 201516 academic years. (It includes data points for the intervening years in an appendix.) The analysis is limited to two main statistics for undergraduates by family income: the share of students who took on debt and the amount they borrowed. These statistics are reported for two distinct groups of students at different points in their enrollment: first-year undergraduates and students who earned a bachelor’s degree in the years covered in this analysis 8 Data for the analysis come from the US Department of Education’s National Postsecondary Student Aid Study (NPSAS), which provides a representative sample of the undergraduate population for the 199596, 19992000, 200304, 200708, 201112, and 201516 academic years. 9

While debt from graduate and professional students makes up a large share of all outstanding student debt (approximately 40 percent), this analysis excludes these students. 10 The income information included in the NPSAS is difficult to interpret for these students because it reflects the student’s own income (and income from a spouse) while enrolled as a graduate student. The undergraduate data include parental income for dependent students or the student’s own income if he or she is an independent. This analysis includes both dependent and independent undergraduate students despite this difference because the overall findings are similar when only dependent students are included in the analysis.

Note that independent students, who tend to have low incomes and make up about half of undergraduates, skews the income distribution of the undergraduate population in this analysis (shown in Appendix C). Debt figures for this analysis include the amount of principal borrowed for all types of student debt (federal student and parent loans, private, state, etc.). They do not show unpaid interest. The 199596 and 19992000 data sets include loans that a student received from a family member in aggregated borrowing figures, but later data sets exclude these loans. To be consistent, this analysis excludes family loans from earlier data sets. 11 Borrowers are grouped into five income categories that approximate the US household income quintiles for the last year in the analysis, 201516. 12 All figures hereafter are in 2015 dollars unless otherwise noted. 13