In order to understand who benefits from student loan forgiveness, such as that proposed by Senators Warren and Sanders, it is necessary to understand who owes the debt. The best publicly available data for this purpose is the Survey of Consumer Finances (SCF), as it provides a large sample of U.S. households and captures information on their demographics, income, education level, assets. and their debts. Therefore, it provides the data needed to answer questions such as “How much of student debt is owed by borrowers in the lowest 20% of households?” Or “how would the cost and distribution of beneficiaries of debt relief policies change if the policy were limited to households with income or debt below a certain threshold?” “

However, the CFS has limitations for examining students debt For several reasons, including, but not limited to, issues that plague surveys, such as a tendency to underreport certain items of income or wealth, the total amount of student debt recorded in the SCF is approximately 25% lower than reported in other sources, such as the total balances reported by the Department of Education or that of the New York Fed Consumer credit panel.

This raises the question of whether the analysis of debt cancellation programs that use SCF is inaccurate or, worse, biased. For example, the SCF design excludes economically independent adults who live in the same household as the main survey respondent, such as roommates or adult children living at home. A practical concern is that parents might not include the debts of adult children “living in their basement” in their response to the CFS, implying that the benefits of debt cancellation that would accrue to young adults. low-income living with their parents are not recognized.

While working in the Treasury Department, Constantine Yannelis and I calculated accurate estimates of the income distribution of student loan borrowers using administrative data from the Department of Education combined with income and income data. tax records. While this data excludes private loans, it also provides a complete and accurate record of debts, income, and income of federal loan borrowers. These data do not present the shortcomings of the CFS. The analysis is summarized here and a more complete table is available here.

In our analysis, we calculated the distribution of student debt for income quintiles in two ways. First, we ranked tax units according to a measure of aggregate income (adjusted gross income excluding above-line adjustments) and asked how much of the student debt was owed by individuals in each quintile (the panel in the middle of Table 1). This analysis suggests that about 15 percent of student debt is owed by taxpayers in the bottom 20 percent of the payout and 35 percent by borrowers in the top 20 percent. (See table and figure.)

Second, we used the income of student loan borrowers as reported on tax forms W2 or Schedule SE (including borrowers who had no income) to classify them in the national income distribution in the Social Supplement. and Annual Economic Survey 2013 of the Current Population Survey (CPS) after adjusting for the age and sex of the student borrower population.

More specifically, we reweighted the CPS data to reflect the age and sex of borrowers according to Dinardo, Fortin and Lemieux (Econometrica 1996). In practical terms, this meant reducing the sample weights on older CPS households who are unlikely to have student debt and increasing the weights on younger borrowers. Intuitively, this analysis asks “if we rank all people with the same income and the same age distribution as student loan borrowers, where do student loan borrowers rank relative to their peers?” “

Using this measure of income, 13% of student debt is owed by the poorest 20% and 36% by the richest 20%.

A direct comparison between SCF administrative data suggests that the true distribution of debt shows a larger share owed by low-income people, but also a larger share owed by higher-income taxpayers. Specifically, the SCF reports that 9 percent of total student loan debt is owed by the poorest 20 percent and 27 percent by the richest 20 percent. The difference is largely that in the SCF a larger share of debt appears to be owed by middle-income borrowers (those between the 20^e and 60^e percentiles).

However, the ranking of tax units and individuals by income may not reflect the economic well-being as well as the ranking by overall income of resource-sharing households, making the interpretation of differences between SCF, units fiscal and complicated. Two adult cohabitators who share the resources and share the rent are probably better off than if they live alone, and the student loan borrower living in their parents’ house is probably better off than the 1040 income alone suggests. of the lowest – income individuals ranked by tax income should probably be ranked higher in the income distribution. Likewise, some of the higher income taxpayers are likely to be joint dual income filers; an adjustment for family size would likely rank some of them lower. Such adjustments would bring the administrative data estimates closer to those of the SCF.

Nonetheless, the larger observation that most student debt is owed by high-income households remains. Across all three sources and methods, student loan borrowers in the richest 40 percent of SCF households owe 53 percent of all student debt; borrowers in the top 40 percent of the income distribution owe 58 percent of student debt, and borrowers in the top 40 percent of the taxpayer distribution owe 59 percent.

Additionally, these numbers do not take into account that we are offering graduated repayment terms and a loan cancellation route for low- and middle-income borrowers, which has reduced the monthly loan burden for millions of people. borrowers and capped payments at 10% of discretionary income. for almost all borrowers who request it. As a result of these income-based repayment plans, we have a federal loan program that is pretty much self-sustaining, funded by the equivalent of a graduated income tax on those who have benefited from the program, offers a eventual debt relief for low-income borrowers, and which requires no major legislative changes to loan programs, higher federal spending programs, or new speculative taxes. There is no doubt that our student loan system needs to be fixed because I have already discussed. For all of these reasons, even if progressive lawmakers succeed in making these important legislative changes, the net effect may not be as gradual as they hoped.