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Third of Student Debt Owned by Only 6% of Borrowers

Students protest debt borrowed for college and university.

One-third of outstanding U.S. student loan debt is owned by only 6% of all student loan borrowers, according to a new report.

The public policy nonprofit Brookings Institution released a report this week clarifying where all of that $1.5 trillion student debt comes and goes.

"A very small fraction of all student loan borrowers have very large loans. Six percent of borrowers owe more than $100,000 in debt, with 2% owing more than $200,000," the report by Brookings' Kadija Yilla and David Wessel found. "This 6% owes one-third of the outstanding $1.5 trillion of debt.

"At the other extreme, 18% of borrowers owe less than $5,000 in student loan debt. They collectively owe 1% of the debt outstanding," the report stated.

About one-quarter of those with student loans borrowed for graduate school, Brookings said, but that one-quarter owns about half of all outstanding student loan debt.

"While only a small share of households with student debt have a graduate degree, loans associated with graduate degrees account for 50% of the total outstanding student loan debt," the report said. Households with student debt headed by someone without a bachelor’s degree account for only one-quarter of total outstanding debt.

And those who owe the most are not the ones defaulting on debt, the Brookings report said.

Brookings said borrowers with graduate degrees who own half of all student debt are the least likely to default. Who has higher default rates? Those who attend for-profit universities, like DeVry and the University of Phoenix.

In February 2018, U.S. President Donald Trump was required to pay $25 million to settle class-action lawsuits accusing Trump University of fraud after failing to deliver on promises to teach students how to succeed in the real estate sector.

"Forty percent of borrowers from for-profit, two-year programs default on their loans within five years," the report said. Just under one-third of borrowers who attended for-profit four-year programs "defaulted in this same timeframe."

Among students who borrowed to attend public community colleges, about 25% default within five years of entering repayment.

Defaults are much less frequent among those who borrowed to go to public or private nonprofit four-year schools.

Student debt is not all about tuition. In some cases, room and board, books, transportation and other living expenses cost well above tuition.

"Many students borrow to not only cover their tuition and fees but also to get cash to finance the cost of living while they are in school," Brookings reported.

Some public schools offer students "tuition free" financial aid. But that doesn't include the dorm or rental housing, or food. For students at public universities and colleges who pay no tuition, 22% borrow $30,000 or more. The average student borrows $24,000, Brookings said, based on an Urban Institute analysis conducted using the National Postsecondary Student Aid Study.

And what about all those young college students receiving bachelor's degrees from four-year colleges and universities? They graduate with little to no debt, Brookings said.

"Thirty percent of all bachelor’s degree recipients graduate with no debt," Brookings reports. "Another 23% graduate with less than $20,000 in loans."

Fewer than 20% of all borrowers owed more than $40,000. Only 12% of those who attended four-year public colleges owed more than $40,000.