The town is dominated economically and demographically by the presence of the main campus of the Pennsylvania State University, often referred to as Penn State. Happy Valley is an often-used term to refer to the State College area, including the borough and the townships of College, Harris, Patton, and Ferguson.
The area is served by University Park Airport.
As of the census of 2000, there were 38,420 people, 12,024 households, and 3,306 families residing in the borough. The population density was 8,459.3 people per square mile (3,267.4/km²). There were 12,488 housing units at an average density of 2,749.6/sq mi (1,062.0/km²). The racial makeup of the borough was 84.31% White, 3.69% African American, 0.15% Native American, 8.77% Asian, 0.13% Pacific Islander, 1.38% from other races, and 1.58% from two or more races. 3.02% of the population were Hispanic or Latino of any race.
There were 12,024 households out of which 10.5% had children under the age of 18 living with them, 22.4% were married couples living together, 3.4% had a female householder with no husband present, and 72.5% were non-families. 33.5% of all households were made up of individuals and 5.9% had someone living alone who was 65 years of age or older. The average household size was 2.30 and the average family size was 2.69.
The age distribution of State College, overwhelmingly influenced by Penn State, was: 5.8% under the age of 18, 65.5% from 18 to 24, 16.2% from 25 to 44, 6.7% from 45 to 64, and 5.8% who were 65 years of age or older. The median age was 22 years. For every 100 females there were 108.7 males. For every 100 females age 18 and over, there were 109.1 males.
The median income for a household in the borough was $21,186, and the median income for a family was $54,949. Males had a median income of $34,388 versus $27,219 for females. The per capita income for the borough was $12,155. 46.9% of the population and 9.7% of families are below the poverty line. Out of the total population, 10.6% of those under the age of 18 and 2.2% of those 65 and older are living below the poverty line. However, traditional measures of poverty can be very misleading when applied to a community like State College which is dominated by students.