Student Loan Debt: Trends and Implications

July 2018
EBRI Issue Brief #453
Paperback, 26 pp.
PDF, 579 kb
Employee Benefit Research Institute, 2018

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Executive Summary

One of the most pressing issues for American families is the growing cost of higher education. Consequently, given this increasing cost, more American families are taking on student loan debt. The Employee Benefit Research Institute (EBRI) is exploring the far-reaching financial implications of student loan debt for families that have it.

This Issue Brief examines the incidence of student loan debt among American families including trends going back to 1992. Furthermore, the amount of outstanding student loan debt and required payments are presented across many demographic characteristics. Lastly, the amount of other assets held, particularly defined contribution plan assets, are compared between those with and without student loans. ?

  • The percentage of American families with student loan debt increased from 10.5 percent in 1992 to 22.3 percent in 2016. However, the percentage with this debt was much higher for families with younger heads. For families with heads ages less than 35, 44.8 percent had student loan debt in 2016, compared with 12.9 percent for families with heads ages 55-64.
  • The distribution of the families having student loan debt across key characteristics versus those that don’t varied widely: 
    1. Those with student loan debt were younger: In 2016, 66.7 percent of the families having student loan debt had heads younger than age 45 and 40.7 percent were families with heads younger than age 35. In contrast, just 28.6 percent of those without debt had heads younger than age 45.
    2. Those with student loan debt had more education: Of families with this debt, 79.2 percent had heads with at least some college education in 2016, compared with 56.3 percent of those without student loan debt.
    3. Those with student loan debt had higher incomes: Just over fifty-five percent of families with student loan debt had incomes in the top 50 percent of all incomes in 2016, compared with 48.8 percent for those without student loans. ?
  • The median outstanding student loan balance increased from $5,363 in 1992 to $19,000 in 2016 (254 percent increase). The average student loan balance had a similar increase from 1992 to 2016 ($11,751 to $34,293— 192 percent growth). ?
  • The median required monthly student loan debt payment for families was $200 in 2016. This represented 3.1 percent at the median of these families’ incomes. However, these loan payments varied significantly, with the 25th percentile of the loan payments being $100 and the 75th percentile being $350, while the 90th percentile ebri.org Issue Brief • July 9, 2018 • No. 453 2 reaches $630. The average payment was $304. ?
  • For families with the youngest heads (those less than age 35) who had a college degree or higher, the families without student loans were somewhat more likely to own a home than those with a loan (45.3 percent vs. 42.1 percent). Yet, there was virtually no difference between these family types having a positive defined contribution (DC) plan balance. Yet, families without student loans had much higher DC plan balances. The median balance was $20,000 and the average balance was $53,638 for the families without a student loan compared with $13,000 and $32,987, respectively, for the families with a student loan.

This growing level of student loan debt has implications for overall financial security and for retirement preparedness specifically. Overall, those with student loans are more likely to have DC plans, but they have lower balances in these plans. The higher likelihood of being in a DC plan is driven by the higher incomes that result from obtaining a college degree. But the presence of student loans leads to lower amounts being accumulated in these plans. However, student loan debt can be considered an investment that helps individuals obtain a better job with higher earnings that cannot be reached without a college degree. Yet, the existence of the loan can hinder younger workers from starting their retirement accumulations, and for those who don’t finish the degree it can place them in a worse situation—more debt without a better job. In addition, the choice of paying for a child’s education can have long-term consequences if the family is forgoing retirement savings to pay for the education.