The Evolution of Student Debt 2019–2022: Evidence from the Survey of Consumer Finances

The statistics in Table 1 illustrate the difficulty in making a simple comparison between student debtors and the general population without controlling for other attributes. For both waves, student debtors have higher median income but lower mean income and lower median and mean net worth when compared with the general population. The low net worth of student debtors relative to the general population is unsurprising because student debt is typically incurred to finance education early in life before debtors have accumulated much wealth (net worth). Indeed, the median ages for SCF respondents in the whole population and the population of student debtors were 52 and 37, respectively, in 2019, while for 2022 the corresponding ages were 52 and 39, respectively. Motivated by this last point, Table 2 complements Table 1 by providing summary statistics for the population of families in which the respondent is under the age of 35.

Table 2 again illustrates the difficulty in making simple comparisons of financial well-being between student debtors and the whole population: young student debtors have higher median income than the whole young population in both waves, but lower median and mean net worth. Further, the mean income of young student debtors exceeded that of the general population under the age of 35 in 2019 but not in 2022. However, note that for both the whole population and the population of young families, we see a sharp difference in net worth between student debtors and nondebtors.

Table 1 and Table 2 therefore show that both the median and mean net worth of student debtors are below that of families without student debt, regardless of whether one considers the whole population or restricts attention to families in which the SCF respondent is below the age of 35. However, the comparison between debtors and nondebtors is more subtle when considering income, with the relative magnitudes between student debtors and families without debt depending on the metric employed (median or mean) and the particular wave of the SCF considered. We now take a closer look at the incidence and burden of student debt by studying its distribution across quintiles of income and net worth.

Student debt by income and net worth quintiles

Figure 1 illustrates the variation of the average student debt held by quintiles of income and net worth across the 2019 and 2022 waves. As seen in the left-hand side of Figure 1, between the two waves there was a significant increase in the average student debt owed by families in the highest quintile of income and a change in the shape of student debt’s distribution across income quintiles. In 2019, the distribution was slightly hump-shaped, rising for the first four quintiles before falling for the highest, but, in contrast, in 2022 the average rose across income quintiles.

As seen in the right-hand side of Figure 1, in both 2019 and 2022 the distribution of average student debt by quintiles of net worth was qualitatively different than that for income and was highest in the lowest quintile. As noted above, this concentration in the lowest quintile is not surprising given the lifecycle nature of debt accumulation: student debt is typically accrued by young people who have yet to accumulate much wealth (net worth). However, even though the distribution of student debt differed between income and net worth, for both variables between 2019 and 2022 there was an increase in the average debt held by families in the highest quintile. Further, for net worth, the highest proportional increase in average student debt occurred in the highest quintile. Thus, although median and mean student debt were almost unchanged between the 2019 and 2022 waves, Figure 1 shows that the distribution of student debt shifted rightward toward higher-income and wealthier families.⁶

Intensive versus extensive margin

As noted above, less than a quarter of families in the 2019 and 2022 waves of the SCF hold any student debt at all. An exclusive focus on averages (even broken down by quintiles) can potentially obscure distributional changes. For instance, the increase depicted in Figure 1 in the average student debt held by the highest income quintile could be a result of changes in the levels of debt held by student debtors in this quintile (intensive margin changes) or a change in the percentage of families with any student debt (extensive margin changes).

To explore this point, Figure 2 depicts the percentage of families in the SCF who hold any student debt within each quintile of income or net worth. The left-hand side of Figure 2 shows that there was essentially no change in the incidence of student debt within any income quintile. The situation with net worth on the right-hand side of Figure 2 is more complicated, with a decrease in the first quintile and increases in the middle three quintiles. However, as with income, the change in incidence for the highest quintile between 2019 and 2022 was slight.

Figure 2 shows that the rise in the average student debt held by the highest quintile of income and net worth in Figure 1 was not a result of changes in the percentage of families with student debt as this is the same across the two SCF years.

Figure 3 complements this analysis by depicting the average student debt held among student debtors, again broken down by quintiles of income and net worth. Figure 3 shows that the sharpest rises in the average student debt among student debtors occurred for the fifth quintile in both income and net worth. Indeed, in 2022 the average student debt held by student debtors in the highest quintile of net worth was essentially the same as that held by the lowest quintile, a noteworthy change relative to 2019’s average in which the student debt held by the lowest quintile far exceeded that of the top quintile.

Mean-to-median ratios and the role of outliers. Figure 2 and Figure 3 show that the increase depicted in Figure 1 in the average student debt held by the highest quintiles of income and net worth primarily represents an increase in the average debt per student debtor family in these quintiles and not a reallocation of such families across the distribution for either measure. Was this a uniform increase in the debt held by families in the top quintile, or was it driven by an increase in the number of families with high debts? To examine this question, Figure 4 plots the ratio of the conditional mean to the conditional median for each quintile of income and net worth.

If the increases in the averages in any quintile were driven by a small fraction of outliers, we would expect the mean-to-median ratio to rise. However, Figure 4 shows that for both income and net worth, in the highest quintile this ratio fell between the 2019 and 2022 waves of the SCF. This suggests that the rise in the average debt held in the highest quintile of income and net worth was broad-based throughout the quintile.

Conclusion

The SCF offers a snapshot into the balance sheets of families in the United States. In this Economic Commentary, we have documented several facts regarding the change in the distribution of student debt between the 2019 and 2022 waves. First, aggregate student debt rose in terms of aggregate amount owed but fell as a fraction of aggregate income and net worth. Second, the average amount of student debt per family rose most, in proportional terms, for the highest quintiles of income and net worth. Third, the incidence of student debt in the highest quintiles of income and net worth was essentially unchanged, implying that the rise in the average debt held in these quintiles was not a result of changes in the number of student debtors in each quintile. Fourth, the mean-to-median ratio in student loans in the upper part of the distributions of income and net worth fell slightly, suggesting that this was a broad-based increase in debt and not driven by a small number of outliers within each quintile. These findings are potentially of interest to social scientists and policymakers because they have implications for the marginal effect of cancellation on social welfare. The more student debt balances are positively correlated with measures of ability to repay (such as income and net worth), the lower the welfare gains of debt cancellation are likely to be.