Trends in Education Borrowing

The Federal Reserve Board of Governor’s Report on the Economic Well-Being of US Households has a wealth of data on student loans, including a breakdown of borrowing by age range, forms of debt, and payment status by school type. Some interesting points:

  • The report shows that borrowing rates– the percent who took out loans for education, whether or not they’ve repaid them– are more than double for 18- to 29-year-olds than for those over age 60. For example, 62% of the younger generation borrowed for their bachelor’s degree, compared with 28% of those over 60.
  • Almost 1/4 of those who borrowed to attend for-profit institutions are behind on their payments, compared with 9% of public college and 6% of private non-profit attendees. The study’s authors note that test scores, which correlate with loan repayment (higher test scores = more likely to be current or paid off), are lower at for-profit institutions, but even when selective schools are removed from the mix the repayment gap persists for for-profit institutions, likely due to lower earnings from the careers to which such degrees provide pathways.
  • While student loans are the primary for all borrowers, with 94% of student borrowers (those borrowing to pay for their own education) and 82% of those borrowing to pay for someone else’s education utilizing student loans, other forms of credit also get high utilization. 1/4 of those paying their own way use credit cards, either in addition to or instead of student loans; among those paying for someone else, credit cards are used by 22% and home equity loans by 14%. While there may have been a case to be made for using a home equity loan (which interest was deductible until the new tax law went into effect in 2018), most borrowers are doing themselves a disservice by using tools other than federal student loans to pay for education.

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