The Distribution of Total Education Debt among U.S. Households

How big are U.S. households’ education loans?

The topic of education debt and its impact on U.S. households has attracted more interest with Senator Elizabeth Warren’s recent proposals for a publicly-subsidized debt relief plan. This memo is the first in a series examining the impact of education debt on household balance sheets and cash flows, using data from the Survey of Consumer Finances1.

In this memo, I examine the distribution of household education debts. I examine the prevalence of education debt, and the overall size of education debts held by households.


Prevalence of Education Debts

Many U.S. households carry education debt, although most do not. The data suggest that about 22% of US households owe any money on educational loans. Typically, these debts helped cover the household heads’ education. Slightly more than 19% owe money on their own loans, and just under 4% owe money for their childrens’ education. In other words, just over one-fifth of American households stand to benefit from an education debt reduction scheme.

Distribution of Education Debts

The median educational debt-bearing household owes $19,000. One quarter owe less than $8,310, and another quarter owe more than $41,600. The top ten percent of debtors carried more than $80,000 in student debt The figure below depicts our estimates of total education debts among debt-bearing households:

Distribution of education debt loans among education debtor households, United States, 2016. Source: Federal Reserve

Note that the x-axis has a custom scale. Had we used evenly-spaced categories, the figure would have a strong right skew. Six-figure education debts are quite rare among educational debtors, and are very rare in the population at large. A proposal to eliminate up to, say, $50,000 in student debt would benefit a large majority of houseohlds. Keep in mind that these are houseohld figures, which would consolidate the debts of two married people would enjoy even more relief if debt relief is provided on a per person basis, as is the case with Senator Warren’s most recent proposal.2

When interpreting these figures, remember that this is the prevalence of debt among the 22% of households with education debts. So, for example, the 10% of education debtor households who owe more than $80,000 corresponds to 2.2% of the overall country. Maintaining a cognizance of this point is important, because it means that people with more than, say $40 thousand, is in fact a rarity in society-at-large.

First Impressions

I’m sure more proposals for educational debt relief will emerge over the course of the Democratic primary. There might be quibbles over who would qualify for it. Proposals will differ over whether to offer relief in the thousands or tens of thousands, and how much maximum relief to offer. There are limits to which conclusions we can draw.

Many Will Be Affected

The data do make it clear that education debt relief is a program with a decently-wide franchise, in the sense that it affects about as many households as a major entitlement program. Presumably, the program would cost less than a major entitlement, because debt relief is generally a one-shot event, as opposed to a continuing expense. If this debt relief program comes without structural changes to education pricing or lending, then there are some prospects for the student debt problem to just start up again, which might cause subsequent generations to ask for this precedent to be repeated. Without concurrent structural adjustments to the industry, then one might ask whether debt forgiveness is just an economic payout to a targeted constituency.

Most Debtors Seem to have Manageable Debts

It seems like most people have relatively modest education debts, around the size of the cost of a new car. I would assume that these kinds of debts could easily be managed by an employed, college-educated household over a five- or ten-year term. Of course, not everyone who takes out debts graduates with a degree, and not all degree-holders maintain employment. These are all questions that can be probed further with this data, if there is interest.

First Reactions After Seeing Data

My first exposuree to these data have led me to pause in supporting higher education debt forgiveness. My initial reflex is to want these kinds of programs, because I believe that unaffordable higher education is a problem. However, I am not convinced that relieving past debts, especially debts this large, would address my reasons for wanting more government investment in education access. I have a lingering suspicion that proposals like Warren’s would benefit a lot of wealthy people who purchased very expensive schooling. I am less concerned with this “problem” – I see this behavior as an already-rich person’s attempt to purchase their way up the ladder. I’m more concerned with the kind of students we serve at CUNY, for whom a $7,000 tuition is a heavy lift because they lack the parental support of their more privileged counterparts.

In a world of limitless resources, I’d say great — let’s do it all. However, political and in turn fiscal realities mean that certain efforts at progressive economic reform will have to hit the chopping block. My first reaction is to think that this is good candidate for early cuts.

  1. Federal Reserve Bank (2017) Survey of Consumer Finances, 2016. Online database.
  2. It is possible to make more precise estimates from the data, but I will bracket the development of precise evidence here. I can follow up if anyone else is interested.

For More

You can download the R Markdown file used to generate these results from Open Science Framework. The data used in this analysis is available for download here.

Author: Joseph N. Cohen

Associate Professor of Sociology at the City University of New York, Queens College

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