Most of the Americans with a student loan spend more on repaying the debts and way less on basic necessities, a new JPMorgan Chase Institute report found.
Titled “Student Loan Payments: Evidence from 4 Million Families,” the report found that one in four families across all ages and income groups spend more than 11 percent of their take-home income on student loans which is way more than they spend on necessities like out-of-pocket healthcare expenses and fuel.
Typically family’s median student loan payment is $179 or 5.5 percent of take-home income in months with positive payments.
The institute compiled the report assembling several distinct data assets from an overall sample of JPMorgan Chase families that made student loan payments from their Chase checking accounts. Initially, the institute identified 30 million core families from which the sample was further narrowed to 4.6 million families that have made at least one student loan payment.
“While consensus is growing about the increasing role of student loan debt in America, there is still limited data about how student loan payments fit into the monthly financial picture for most Americans,” said Diana Farrell, President, and CEO of the JPMorgan Chase Institute.
“By understanding the relationship between these student loan payments and other financial outcomes, we hope to provide policymakers, lenders and other stakeholders with valuable information that can help shape policies to ease this burden for America’s families.”
Student loan payments mostly burden young and low-income families. A quarter of borrowers under 25 spend 16.8 percent or more of their take-home income on student loans while one in four families with an annual gross income of $50,000 or less spends 14.7 percent or more on repaying debt.
Low-income families are also inconsistent in comparison to high income when it comes to repaying back the loans. As compared to 63 percent of the high-income families only 44 percent of the low-income families make consistent student loan payments.
Furthermore, the report found that student loan payments are directly affected by job loss and unemployment benefits. Student loan payments fall by 7 percent upon job loss and 27 percent once unemployment benefits expire.