Optimizing Financial Education Utilization

Title

Student Loan Payments: Evidence from 4 Million Families

Document Type

Issue/Research Brief/Blog

Publication Date

7-2019

Keywords

student loans, income-driven repayment plans, socioeconomic status, gender, payment consistency and volatility

Abstract

Student loan debt has more than doubled over the last ten years, totaling $1.5 trillion and affecting 45 million borrowers by the end of 2018. In this report, the JPMorgan Chase Institute uses administrative banking data to assess student loan payments in conjunction with other household financial metrics, including income, spending, and non-student loan debt payments. We analyze checking account activity from over four million families that made student loan payments between 2012 and 2018 to understand how student loan payments fit into families’ broader financial lives.

We find that the median family in our sample spends 5.5 percent of monthly take-home income on student loan payments, with one in four spending more than 11 percent; these numbers are even higher for young and low-income families. Just 54 percent of families in our sample make payments in more than 90 percent of months, a lower consistency than observers may expect, and lower than the same measure for mortgage and auto loan payments. In addition to publishing new summary statistics around student loan payments, we also generate two event studies, centered on the first and last observed student loan payments, respectively. We find that families tend to start making student loan payments following increases in labor income and liquid assets. Similarly, both of these metrics decrease on average following the final observed student loan payment, though this masks considerable variation across families. Altogether, our results offer new insights into student loan payment patterns in conjunction with other observed financial behaviors, and contribute to the ongoing debate regarding student loan repayment structure.

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