Borrowers With High Debt Levels Struggle to Repay Loans

February 19, 2018

The share of borrowers graduating with high student loan debt balances has shot up in recent years. And, increasingly, those borrowers are struggling to pay back those loans, according to a Brookings Institution paper released last week.

The paper's authors, Adam Looney and Constantine Yannelis, find that between 2000 and 2014, the share of those borrowers graduating with $50,000 in student loans more than tripled, from 5 percent to 17 percent. Those borrowers now hold the majority of outstanding student loan debt.

The profile of those borrowers has also changed. Before, large-balance borrowers typically attended graduate or professional schools and saw strong salary returns. But today, those borrowers are often parents or independent undergraduate students and see a much higher share of their income go to loan payments. Meanwhile, the share of borrowers taking out those kinds of high loan volumes only for graduate school has declined. And high-balance borrowers were more likely to have attended less-selective institutions and for-profit colleges.

Those borrowers have taken advantage of options like income-driven repayment but are seeing interest accumulate on their loans faster than they can pay them down.

Looney and Yannelis recommend policy makers consider targeted responses, including smaller loan limits and accountability measures for colleges based on outcomes for graduates and parent loans.

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