The Changing Profile of Student Borrowers

In 2012, a record share of the nation’s new college graduates (69%) had taken out student loans to finance their education, and the typical amount they had borrowed was more than twice that of college graduates 20 years ago. A new Pew Research Center analysis of recently released government data finds that the increase in the rate of borrowing over the past two decades has been much greater among graduates from more affluent families than among those from low-income families. Fully half of the 2012 graduates from high-income families borrowed money for college, double the share that borrowed in 1992-93.¹

The rise in the rate of borrowing was also substantial among upper-middle-income graduates, with 62% of 2012 graduates from upper-middle-income households leaving college with debt, compared with 34% roughly 20 years ago.

While graduates from the highest income homes saw a faster rate of increase in borrowing, those from low-income families continue to be more likely to graduate with student loans.

While graduates from the highest income homes saw a faster rate of increase in borrowing, those from low-income families continue to be more likely to graduate with student loans, with 77% graduating with debt in 2012, compared with 50% of their most affluent peers. And the share of low-income graduates who borrow has also increased in recent decades, rising from 67% to 77% over a period of roughly 20 years. But the rate of increase in the likelihood of borrowing has been much more modest among graduates from the lowest income group than it has among middle- and high-income graduates over the past 20 years.

What has changed over the course of roughly two decades then is the pervasiveness of student borrowing across income groups: In the early ’90s, only among graduates from low-income families did a majority of graduates finish college with student debt. Now, solid majorities of graduates from middle-income families (both lower-middle and upper-middle) finish with debt, and half of students from the most affluent quartile of families do the same.

The Pew Research analysis shows, similarly, that there has been a sharper increase in student borrowing among graduates with more highly educated parents. In the class of 2011-2012, some 61% of students whose parents also had graduated from college left school with some student debt. This represented a 50% increase compared with students from similar backgrounds who graduated 20 years earlier. The increase in borrowing among students whose parents have less education was significantly smaller, although those students remain more likely to borrow.

Among recent college graduates who borrowed, the typical amount of cumulative student debt for their undergraduate education increased from $12,434 for the class of 1992-93 to $26,885 for the class of 2011-12 (figures adjusted for inflation). The increase in the median amount of debt by newly minted borrowers between the class of 1992-93 and the 2011-12 varied somewhat by the graduates’ economic circumstances. But regardless of family income, the typical amount owed at graduation increased about twofold over this time period.

The profile of student borrowers has shifted not only along economic lines but also by gender. Female graduates are now somewhat more likely than male graduates to have borrowed money to finance their college education, and women in the class of 2012 owe more of the total student debt than their counterparts in the class of 1993.

Again, most of the change is apparent in rates of borrowing. In the class of 1993, female graduates (49%) were about equally as likely to borrow as male graduates (50%). In the class of 2012, female graduates (71%) were more likely than male graduates (67%) to borrow. This new gender difference in student borrowing may reflect the fact that female college students and graduates tend to be from more disadvantaged family backgrounds than their male counterparts (Buchmann and DiPrete, 2006). The typical amount owed at graduation increased about twofold between the class of 1993 and 2012 for both men and women.

The characteristics of student borrowers are relevant to at least a couple of ongoing discussions surrounding student debt. The creditworthiness of student borrowers has come under much scrutiny (Fry, 2014). Delinquency rates on student debt have increased (Lee, 2013). Among young debtors, those with student debt once had similar credit scores to those lacking such debt. Economists at the New York Federal Reserve have shown that now young student debtors have significantly lower credit scores than those without student debt (Brown, Caldwell, and Sutherland, 2014). The decline in creditworthiness is thought to perhaps be tied to the expansion of postsecondary education and the participation of students from lower income backgrounds. At least among those completing a bachelor’s degree, however, student borrowers are not increasingly from less affluent circumstances. The decline in the credit quality of student borrowers may not be due to a change in the economic profile of student borrowers.

In addition, a number of recent proposals to relieve the educational debt burden involve student debt forgiveness to varying degrees (Gale, et. al., 2014). The distributional implications of who stands to gain from such relief are important to the analysis of such proposals.

The remainder of the report provides some background information on the rise in student debt since 1990, as well as trends in the accumulated debt of students finishing bachelor’s degrees. It also includes new findings on student debt outcomes by family background and gender, rates of borrowing, the median amounts borrowed by graduates and an analysis of which groups owe what shares of the total debt. The final two sections of the report present some of the common explanations given for why student borrowing has grown so much over the past two decades.