Student Loan Borrowers With Certain Demographic Characteristics More Likely to Experience Default

This analysis was edited on Jan. 25, 2022, to correct the date when student loan repayments resume, from Dec. 31, 2022, to a date later this year.

Over the past two decades, student loan borrowers falling into certain demographic groups have been more likely than others to experience default, according to a survey done for The Pew Charitable Trusts. Those groups include Black and Hispanic borrowers, older borrowers, female borrowers, and borrowers who reported having a disability or being widowed, divorced, or separated.

Problems with repayment are widespread. About a third of federal student loan borrowers in the survey reported experiencing default at some point over that time period. And among those who defaulted, nearly two-thirds experienced default more than once.

Since March 2020, the federal student loan payment and interest pause put in place in response to the COVID-19 pandemic has prevented more borrowers from entering default. But that pause is set to expire later this year, and the Department of Education has announced a program to help those in default get back on track.

Under that plan, borrowers experiencing default can opt to have their loans returned to good standing at the end of the pause, mitigating some of the serious consequences of default as they resume payments. In addition, the student loan forgiveness plan announced by the Biden administration in August could eliminate an estimated 42% of balances of borrowers with loans in default or severe delinquency prior to the payment pause.

Given the high rates of default and re-default, many borrowers with remaining balances will still be vulnerable to repayment struggles, as will those who enter repayment for the first time and face difficulties affording payments. The data here provides insights into the demographic characteristics of borrowers who have been most likely to experience default in the past to help inform policymaker efforts to mitigate repayment challenges going forward.

Pew’s survey, done in mid-2021, found that default outcomes vary significantly by certain borrower characteristics. (See Figure 1.) For example:

• Race. Consistent with earlier research, the survey found that Black (50%) and Hispanic (40%) borrowers are more likely to have their loans default than White borrowers (29%). This is not to say that race or ethnicity inherently lead to poor repayment outcomes; rather, factors that disproportionately affect historically marginalized groups—such as people of color, women, first-generation college students, and students from low-income households—could be at play. For example, studies indicate that at least some of the disparity between Black and White borrowers can be attributed to differences in family income and wealth and the effects of housing and labor market discrimination.
• Age. Borrowers aged 45-59 at the time of the survey were most likely to have experienced default (47%), which could reflect difficulties for students who borrow as adults. Prior research has shown that older borrowers experience default on their loans more often and are subject to additional consequences, such as Social Security offsets.
• Gender. Borrowers identifying as female (37%) were slightly more likely to have experienced default than those identifying as male (30%). More generally, gender income and wealth gaps persist, with women earning significantly less than men after graduation, even within the same program of study. Lower incomes can mean fewer financial resources available for monthly payments.
• Disability status. Borrowers who reported ever having a disability were significantly more likely to experience default (50%) than those without a disability (33%). Earlier research indicates that borrowers with disabilities may face lower incomes and higher unemployment rates, which could make affording payments difficult. Although some disabilities qualify borrowers for automatic discharge of their student loans, others could have undocumented disabilities or have been unable to successfully discharge loans before recent reforms by the Biden administration to simplify the process.
• Marital status. Additionally, borrowers who said they were divorced, widowed, or separated at the time of the survey reported the highest rate of default experience (58%) of any borrower group. Some analyses have suggested that these borrowers may have difficulty managing previously consolidated loans during a marriage. Women are more likely to experience general loss of financial resources following a divorce than men and could be overrepresented in this group.

This survey data builds on prior research that has identified which borrower groups are most likely to experience default. It highlights the importance of understanding the likelihood of default for borrowers with disabilities and those who have been widowed, separated, or divorced.

As borrowers prepare to make student loan payments for the first time since the start of the payment pause in March 2020, policymakers should consider which types of borrowers have historically been more likely to experience default and may be most likely to do so once repayment resumes, to lessen the chances of future repayment struggles.

This analysis is based on data from an online survey conducted by NORC using its AmeriSpeak probability panel on behalf of The Pew Charitable Trusts. This nationally representative survey, conducted from June 18 to July 28, 2021, studied borrowers’ experiences in and perceptions of the repayment system with a focus on those who had ever had a loan in default. Conducted after the federal student loan payment pause was announced in March 2020, respondents were asked to think specifically about their experiences with repayment and default before the start of the pause. Data collection was among a sample of 1,600 respondents. The margin of error for all respondents was +/-3.5 percentage points at the 95% confidence level.

Lexi West is a principal associate with The Pew Charitable Trusts’ project on student borrower success, Ama Takyi-Laryea is a manager and Ilan Levine is an associate with Pew’s’ student loan research project.