from the Boston Fed
The swift rise in the stock of student loan debt in recent years – even during the Great Recession when other types of consumer debt contracted – has received much attention among researchers, politicians, and the media. Indeed, student loan debt has now surpassed credit card debt to become the second largest amount of household debt outstanding after mortgage debt. Unlike credit card debt and other household liabilities, however, student debt cannot be discharged in bankruptcy. It therefore represents a long-term financial burden for many individuals and/or households that must be repaid. A key question is how student loan debt may impact individuals’ economic outcomes. For example, it could hinder an individual’s or household’s ability to obtain a mortgage and purchase a home.
To date, there has been much analysis of the evolution of student loan debt and its place on the liabilities side of household balance sheets (see, for example, Brown et al., 2012, 2014), but much less work examining the impact of student loan debt on homeownership and other economic outcomes. The existing research is limited in part by the availability of data: most data come from credit bureau records, such as the Federal Reserve Bank of New York’s Consumer Credit Panel (NY CCP), which offer detailed information on individuals’ liabilities but very limited demographic information and no data on financial assets. For instance, the NY CCP contains no education data and so it is not possible to distinguish individuals who went to college but did not accrue any debt from individuals who have no student debt because they never attended college. Individuals who attended college without college loans or individuals who repaid student debt soon after finishing school are likely to differ substantially from individuals who never attended college. This potential disparity in education levels among individuals without any student loan debt makes it difficult to interpret results that compare economic outcomes for these individuals using credit bureau data.