The United States of Student Debt - 2023 Report
Sinking into Debt: an Analysis of Student Loan Repayments Data
This is the third part of our four-part series that looks at the debt burden facing U.S. borrowers today – and the post-pandemic policy changes that will shake it up – created with career data journalist Emily Barone.
If you’ve been following the series, you know we’re on a quest to help you decode the labyrinth of student loans.
After exploring the details of what makes up student debt in the U.S. and across the world in Part 1, we then looked at the rapid growth of debt before the impact of the pandemic in Part 2.
But you’re probably wondering: “Who’s really bearing the brunt of this debt crisis?” Good question! Buckle up because in this part of the series we’re going to break down who’s struggling the most with repayments.
The largest debt burden goes to...
Student debt in the U.S. is not uncommon: More than 4 in 10 people who went to college took out student loans, and about half of them still have outstanding balances. For these borrowers, the system can be punishing and have long-term consequences. Borrowers may feel pressure to choose a career that can support their debts, rather than work in less-lucrative fields that fulfill their passions such as education, nonprofits, or the arts.
In addition, U.S. borrowers who fall out of work for any reason, such as becoming ill or losing their jobs to economic circumstances, may end up financially strapped, having to choose between paying loan obligations and affording other living expenses. In those cases, delinquent or defaulted loans can lower credit scores, making it harder to get future loans.
And then there’s the broader societal challenge of debt repayment pressure: The burden can deter people from pursuing higher education altogether because it becomes unaffordable.
But not everyone is impacted the same way. Debt varies significantly depending on the borrower characteristics—the degree achieved, the type of school attended, and certain demographic and socioeconomic traits. To get the best sense for which borrowers carry the most debt—and which of them are struggling most to repay—Studocu looked at the Department of Education’s “College Scorecard” database, which contains comprehensive metrics on post-secondary costs, federal loans, and repayment and default rates for more than 5,000 schools across the country.
First we looked at the median loan debt accumulated at each institution by all undergraduate student borrowers at their time of departure (either graduating or withdrawing). For instance, if a student receives a loan for $2,000 for eight semesters, their debt is $16,000 for that school. That’s effectively their starting loan principal before interest.
In the 2020-2021 school year, half of schools had a median starting debt of $5,000 to $10,000 among their students.
There’s also variation in debt loads around the country. Broken out by state, the median debt at each school depends somewhat on geography. Here, we took the average of all the public schools in each state.
With the caveat that some states have many more schools than others (and a small number of schools could affect the average), the range is significant: Wyoming, Illinois, Utah and Kansas have schools that average less than $8,000 in debt while Vermont, South Dakota, New Hampshire and Pennsylvania have schools that average more than $13,000. In general, the public schools in the eastern half of the U.S. have the highest levels of student debt.
Who's struggling to repay their student debt?
Not all who take out student loans have a difficult time repaying them. We used 2019 data from the College Scorecard to analyze a) which schools had students with the highest debt loads, and b) which schools had the best repayment rates among students after three years.
First we looked at school type. We found that private non-profit schools have students with much higher debts, but also the lowest default rates, as shown in the charts below:
The reputation of private Ivy League schools makes it easy to presume that private non-profit schools capture more elite or successful students, but many reports have disputed this notion. Plenty of public schools are highly prestigious. And National Center for Education Statistics (NCES) data show that selective public schools with less than a 25% acceptance rate tout higher student retention than similarly selective private schools. Using acceptance rate as an indicator of prestige, we found that schools with more selective admissions (public or private) have fewer students in default.
Loan trends aren’t just defined by school characteristics (the university’s location, governance, acceptance rates, and tuition rates, for example). They’re also defined by the students. To find out whether larger initial loans result in more debt over time for different cohorts of students, we looked at whether students obtained a degree, whether they were the first in their family to go to college, and whether they belong to a minority race or ethnicity.
Although we analyzed these student characteristics in isolation, it’s important to note that there is overlap among the student groups covered. For instance, the data shows that Black and Hispanic students are more likely to be first-generation college goers and are less likely to graduate than their White and Asian peers.
We found that certain groups of students have more success paying off loans, even if their initial borrowing amounts are high. Others have trouble repaying, even if their initial amounts are low.
What we discovered about loan repayment...
#1
Earning a college degree tends to result in better loan repayment
Getting through college is tough. But so is paying down loans after dropping out. Earning a college degree tends to result in better loan repayment.
Completion rate is the percent of students who attain a degree within a normal timeframe. Those who stick it out tend to take on more debt, we found in our College Scorecard analysis. This makes sense, as the more time spent in school results in more tuition.
But even though their loan amounts are smaller than their peers who graduate, students who do not complete their degrees have more trouble paying off their loans. In part, this is because those with a degree have higher chances of earning more. As noted at the beginning of this report, employed workers with a bachelor’s degree or higher earn 1.8 times more than workers with a high school education who did not attend college.
College completion, however, is easier said than done. NCES reports that 64% of the students who first enrolled in a four-year program back in 2014 had successfully finished their degree by 2020. In other words, more than one in three students didn’t complete in that normal time frame.
#2
First generation students borrow smaller amounts but have trouble paying it down
First-generation students whose parents did not attend college take on less initial debt but are more likely to end up with greater debt over time.
NCES has found that 74% of first-generation college students who graduated took out loans compared with 65% of non-first-generation students. The initial amount they owe upon leaving school tends to be lower, however.
According to a report from the Postsecondary National Policy Institute (PNPI), the average federal student loan amount for first-generation students was $7,610, compared with $8,543 for non-first-generation students in 2015-16 (the most recent data available).
There are several reasons why first generation students appear to start out with less debt. For one, data from PNPI shows that these students are more likely to attend two-year public institutions and for-profit schools than the national average.
This is evident in the College Scorecard data, which found that public and for-profit schools tend to have a greater share of these students. We also found that colleges with higher rates of first-generation enrollment have students who carry lower debt upon leaving.
Our analysis encompasses all students who took on debt to enroll—not just those who graduated. This is because first-generation students are twice as likely to leave school within three years (33%) than students whose parents have a bachelor’s degree (14%), according to a 2018 NCES study. Early leave may also be one reason why these students have less initial debt.
But first-generation students are not as successful at paying down their loans. In our analysis that looked at loan progress over a three-year period, we found that schools with more first-generation students have a larger share of students who fail to make repayment progress.
Other research supports this finding: The Institute for College Access and Success (TICAS), for example, noted in 2018 that first-generation students were more likely to end up in default than students whose parents had attended college. Over a 12-year period, the default rate was 23% among first-generation students but only 14% among non-first-generation students.
Given this struggle, it’s perhaps not surprising that first-generation students tend to start off with less debt than their continuing-generation peers, but end up shouldering more debt over the long term. A Pew Research Center study based on Federal Reserve data found that about two-thirds (65%) of first-generation college graduates surveyed in 2019 owed at least $25,000, compared with 57% of second-generation college graduates.
#3
Certain minority groups are disproportionately affected by student loans
The data shows that some groups of minority students are more likely to struggle to pay off student loan debt.
While the College Scorecard data indicates which schools in the database have minority-serving designation (such as HBCUS, Historically Black Colleges and Universities), there aren’t a significant number of these schools in comparison with the wider pool.
In order to see correlations between race and three-year loan repayment progress at the institution level, we looked at each school in the College Scorecard database four ways: by share of White students, share of Black students, share of Hispanic students, and share of Asian students.
After plotting these four demographics against the loan repayment progress metrics, we found that there is no correlation between repayment and Hispanic share of the student body (possibly because Hispanic ethnicity can be any race) but we did notice correlations with the other three race breakouts.
Schools with more White and Asian students have student borrowers who generally see better repayment rates (declining loan balances) three years after leaving school. But schools with more Black students have student borrowers who tend to see their balances stay flat or increase over that time.
As mentioned earlier in this section, certain minority race groups overlap with other student groups (such as first-generation students and those with unfinished degrees) who also experience more debt burden over time. This speaks to the many challenges that minority students, especially Black students, face as they enroll in school and assume student debt.
NCES, which also tracks loans by race and ethnicity, found that Black students have the highest rates of student financial assistance. Among all Black people who completed their bachelor’s degree, 76% took federal loans and, as of 2018, carried a total outstanding loan amount of $32,500, according to the agency’s data. That’s both the highest loan rate and highest loan amount of all other races and ethnicities in the data set.
The trends are even more stark for recent graduates. Take, for instance, the cohort of students who attended four-year colleges and who successfully graduated in 2015-16. (As discussed earlier, these students leave school with higher debt loads than their peers who go two-year programs or who don’t complete their education—but they also tend to be more successful in paying down the debt.) By 2020, four years after completing school, these students had borrowed $45,300 on average, according to NCES, which includes undergraduate debt plus any subsequent graduate debt.
That number may seem staggering, but for Black students, the average amount stood nearly 30% higher, at $58,400. And it exceeded the average amount borrowed by every other race and ethnic group including Asian ($49,100), multirace ($43,400), White ($43,300), Hispanic ($41,700), and American Indian/Alaska Native ($36,900).
What’s more, the Black students in the class of 2016 were the only group to see the loan value rise between 2016 and 2020. They owned 105% of the initial loan amount, meaning their loan had grown 5% over the four years. Asian students, by contrast, owned 63% of their original loan amount.
These racial disparities are alarming, but not entirely surprising in the broader context of fewer financial opportunities and resources that Black people in the U.S. are afforded.
In a report released this year, TICAS took a sharp look at loan burden along racial lines, and noted that structural racism and other unjust societal factors lead to inequalities in college affordability. However, these factors are often left out of discussions about college value. What this means, in effect, is that the value of a college education is not the same for one demographic as it is for another. (TICAS’s analysis was also based on College Scorecard data, but considered different database metrics than Studocu did.)
TICAS also noted in a 2021 assessment of racial disparities, that “inequities throughout the education pipeline and systemic racism and its resulting wealth gaps hit Black students especially hard no matter where they enroll, but colleges that systemically offer little payoff for students, and produce egregiously bad loan outcomes, disproportionately enroll Black students.” This is one reason why Black students are more likely to borrow federal student loans, and assume greater amounts of debt.
Black students are already at a financial disadvantage when they leave school due to their heavier debt burden. But then they also have to enter a workforce that is still working to close racial wage gaps. Using a salary survey, Payscale found in 2019 that Black men earn $0.87 for every $1 earned by similarly-qualified white men in the same job. Additionally, Payscale noted, hiring discrimination makes career growth more difficult for people of color and hiring biases limit job advancement. It’s evident, therefore, that that repayment barriers make it significantly more challenging for Black students to make progress on their loans.
What's next?
PART 4: What you need to know about upcoming changes to U.S. student debt.
Next up we look into the changes that are on the horizon that could shake up everything you know about student loans.
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Want to see the full report with the detailed analysis? Download it here