Student Borrowers Often Get Help Paying Debt, Study Shows

Advantages Aren’t the Same Across Racial Groups, However

Graduate students standing in a row, outdoors - stock photo

 Barry Austin Photography

With over $1.5 trillion in student loan debt in the U.S., a new study finds a surprising number of people are helping to pay someone else’s loans, a trend disproportionately benefiting White and higher-income borrowers.

Thirty-nine percent of people making student loan payments are actually helping to pay off someone else’s debt, according to findings released this week by the JPMorgan Chase & Co. Institute, which studied just over 300,000 Chase bank account holders in 2015 and 2016. Sixty-nine percent of those “helpers,” as the study called them, had no student loan debts of their own and paid more than the borrowers themselves, on average. The study surmised these helpers are often spouses or parents. 

The helper phenomenon adds a new layer to the dynamics of the student loan “debt trap,” which disproportionately affects Black, and to a lesser extent, Hispanic borrowers, JPMorgan found. Black borrowers in particular are less likely to have help paying off their loans and struggle more than White borrowers to keep up with their debt, making it more likely their student loan balances will get larger even as they try to pay them down, the study revealed.

“These dynamics of repayment put Black borrowers at a disadvantage, who, relative to White borrowers, have lower incomes and higher debt balances and are 4 times as likely to have no payments made against their loans, partly due to the fact that they are less likely to receive repayment help,” the study’s authors wrote.

Those with student loan debts pay a median 3.8% of their take-home income annually, but lower-income and younger people can face a burden of over 10%, according to the study. And low-income and older people with student loan debt are more likely to fall behind.

Seven percent of all people holding student debt, excluding those in deferral, may never be able to pay off their loans, the study found. Broken down by race, 13.1% of Black borrowers—compared to 6.8% of White borrowers and 8.4% of Hispanic borrowers—were so behind on payments that they were on track to never pay off their loans.

(It should be noted that these findings were based on a subset of the 300,000 Chase customers who had identified their race in voter registration records. Those 110,000 customers were from Louisiana, Georgia, and Florida.) 

The findings underscore that assistance programs need to better take into account the outside payment support that certain borrowers receive, the authors wrote. For instance, targeted debt forgiveness could help those who are the most overwhelmed by student loan debt, they wrote.