Executive Summary
Student loan debt is the fastest growing household debt category, having more than doubled over the last ten years to $1.5 trillion in 2018, second only to mortgage debt, and affecting 45 million borrowers. Although the financial returns from a higher education degree over a lifetime typically exceed the costs, roughly 22 percent of student loan borrowers are in default. As a result, some have framed the “student loan crisis” as a crisis of student loan repayment rather than student loan debt. Since 2009 a range of income-driven repayment options has emerged to mitigate the financial burden for families by better aligning repayment obligations with their ability to pay.
A major complication in policymakers’ ability to propose promising solutions is the lack of data on how families—not just individual borrowers—are shouldering the burden of student loan repayment and the impact of student loan debt on other financial outcomes. The central challenge is that student loan payments and debt information are difficult to observe in conjunction with other financial outcomes, such as income, spending, and other debt payments, and certainly not on a high-frequency basis for large samples.
With this report, the JPMorgan Chase Institute aims to describe how student loan payments fit into the context of families’ larger financial lives. We offer the debate insight into a new, high-frequency cash flow perspective on student loan payments and how they relate to a family’s income, liquid assets, spending, and other debt payments. This perspective, based on student loan payment transactions observed out of a universe of 39 million Chase checking accounts between October 2012 and July 2018, is novel not just for its large sample size, but also its visibility into private and federal student loan payments (including any fees and fines), alongside income, spending, liquid assets, and other debt payments. In addition, this data asset is distinct in terms of its family perspective, which allows us to take into consideration the potential for a family to be making payments on multiple student loans and on behalf of other borrowers. This is an important, but often overlooked or hidden piece of the student loan repayment picture, given that roughly 19 percent of individuals report receiving help from others to pay off their student loans.
With this new data asset, we aim to answer five key questions:
- What share of take-home income are families spending on student loan payments?
- How does the financial burden of student loan payments differ across demographic groups?
- How consistently do families repay student loans, and how volatile are repayment amounts?
- In what ways do student loan payments differ from other types of loan payments, notably auto loan and mortgage payments?
- How do student loan payments fluctuate with income, liquid assets, and expenditures?
