7% of borrowers on track to never pay off student loans, new report finds
The JPMorgan Chase Institute recently published some alarming statistics on the current state of student debt in the United States.
They estimate that about 7% of borrowers will probably never be able to repay their student loans.
“American families carry more than $ 1.5 trillion in student loan debt,” say the authors of the research, led by Diana Farrell of the JPMorgan Chase Institute. “This debt has provided many with the opportunity to pursue higher education, but remains a significant, potentially crippling financial burden for others.”
What is most disturbing is that the debt burden disproportionately affects minority groups. They estimate that 13% of black borrowers are on track to never repay their student loans, and that minority groups are two to three times more likely than whites to never have made a repayment on their loans.
“Black borrowers appear to experience more difficult student loan debt circumstances compared to white borrowers based on all of the metrics we explored: payment load, payment assistance received, default, deferral rate, and delay in payment. reimbursement, ”say the researchers. “So, as presently constituted, the credit markets for student loans threaten to amplify rather than narrow the disparities in racial wealth between the generations.”
This, of course, defeats the fundamental purpose of education, which is to provide a path to financial stability for people from all walks of life.
To come to this conclusion, the researchers assembled a dataset of more than 300,000 Chase chequing account customers who had unpaid student debt or were making student debt payments. They linked data from Experian’s credit bureau to these people’s bank data, which allowed researchers to explore key attributes of loan holders such as income, student loan repayments, inception date. of the loan, the age of the account holder and, in some cases, race and ethnicity.
All of this data paints a grim picture of America’s student debt crisis, and a particularly grim picture for minority borrowers.
What can be done to fix the problem? One obvious solution is to curb rising tuition fees. But that’s only part of the story. The biggest problem, according to the researchers, is the high degree of income and wealth inequality that exists between whites and minorities.
“Black borrowers are more likely to face a student debt ‘trap’, in part because they have lower incomes and assets and possibly fewer people in their network who may be able to help. reimbursement when they need help. »Say the researchers.
At this point, researchers report that about 40% of those involved in student loan repayments help someone pay off their student loans, with most caregivers not having student loans themselves. In other words, paying off student loans is a “family affair”.
Here, minority borrowers are again at a significant disadvantage: only about 19% of blacks and 26% of Hispanics fall into the category of “assistants,” or someone who has made payments for a student loan but does not have loan themselves.
Researchers believe that targeted debt assistance programs could also be expanded to help ease the burden on existing student loan borrowers.
The analysis revealed other notable characteristics of student loan holders, including:
- the middle age number of student loan holders was 39.
- the median income of student loan holders amounted to approximately $ 56,000 / year.
- The quantity of cash held by student loan holders was estimated to be around $ 3,600.
- the median loan balance was approximately $ 14,500.
- the median installment loan balance was approximately $ 107,000.
Data and numbers aside, it’s important to remember that the effects of excessive debt are as much psychological as they are financial. A recent to study published in the Journal of Experimental Psychology found that student loan debt was associated with lower levels of life satisfaction more than other types of debt such as mortgages and credit card debt.
“Consumers are less satisfied with life when they carry debt that they mentally qualify as debt,” say the researchers, led by Adam Greenberg of Bocconi University. “While consumers rightly view their student loans as debt, they are less likely to label their mortgage or credit card balance as debt. For this reason, although they represent the largest debt, mortgages are less related to consumer satisfaction in life than student loans; and although they represent some of the costliest debts, credit card balances are less tied to consumer satisfaction than student loans.