A recent analysis by economists at the Federal Reserve Bank of New York looked at the approximately 14% of American households that had negative wealth in 2015 and pointed out student loan debt as a key driver of negative wealth.
It is likely that the steady growth in student debt and borrowing, combined with the very slow rate of student loan repayment we have documented elsewhere, has materially contributed and will continue to contribute to negative household wealth and wealth inequality.
As the authors note, households with a bachelor’s degree or higher and negative net worth tend to have a young head of household.
For example, my household is just now leaving negative net worth territory, five years after our head of household completed law school.1 Paying off student loan debt is difficult, but the rapid growth in takeup of income-driven repayment plans among high-debt individuals (as shown in this recent White House report and in the chart below) has the potential to reduce this burden.
