Do people with the biggest student debt burdens tend to be high earners?
According to 2020 data recently released by the Federal Reserve, more than half of student loan debt is owed by borrowers in the top 40% of income brackets. This pattern has held true in four surveys since 2001. Those in the bottom 40% hold just under 20% of debt.
Achieving higher levels of education adds more debt, but often boosts income. The 3% of adults with doctorates or professional degrees have median earnings double those of the general population, and owe 20% of all education debt. The debt pattern also means that any measures to forgive all of everyone’s debt would give most value to upper-income borrowers, increasing inequality.
The use of income-driven replacement plans, which don‘t require any payments from borrowers whose incomes are too low, helps explain why “out-of-pocket loan payments are concentrated among high-income households.”
