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Education loans and wealth building among young adults

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  • Zhan, Min
  • Xiang, Xiaoling
  • Elliott, William

Abstract

With the use of education loans growing rapidly as a way to finance college education, it is important to examine how such loans impact the future financial well-being. This study examines the association between education loans and postcollege wealth accumulation among young adults, the group with the greatest share of outstanding education loans. Data come from 15 rounds of data of the 1997 National Longitudinal Survey of Youth, and the analyses control for a number of student characteristics, college experiences, and parental income. Results from a treatment-effects model indicate that having education loans upon leaving college is negatively related to postcollege net worth, financial assets, nonfinancial assets, and value of primary housing. Furthermore, having education loans also has an additional negative link to the value of net worth among Black young adults. The relationship between the amount of education loans and wealth accumulation is not statistically significant among those with outstanding loans. The study findings indicate the importance of developing alternative approaches, instead of additional loans and other credits, to meet the financial needs of college students.

Suggested Citation

  • Zhan, Min & Xiang, Xiaoling & Elliott, William, 2016. "Education loans and wealth building among young adults," Children and Youth Services Review, Elsevier, vol. 66(C), pages 67-75.
    • Handle: RePEc:eee:cysrev:v:66:y:2016:i:c:p:67-75
    DOI: 10.1016/j.childyouth.2016.04.024
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    2. Petar Peshev, 2023. "Estimation of the Value, Distribution and Concentration of Wealth in Bulgaria, 1995-2020," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 104-129.
    3. Lu Fan & Swarn Chatterjee & Jinhee Kim, 2022. "An Integrated Framework of Young Adults’ Subjective Well-Being: The Roles of Personality Traits, Financial Responsibility, Perceived Financial Capability, and Race," Journal of Family and Economic Issues, Springer, vol. 43(1), pages 66-85, March.
    4. Zhan, Min & Xiang, Xiaoling, 2018. "Education loans and asset building among black and Hispanic young adults," Children and Youth Services Review, Elsevier, vol. 91(C), pages 121-127.
    5. Jason Jabbari & Mathieu Despard & Olga Kondratjeva & Brinda Gupta & Michal Grinstein-Weiss, 2023. "Nothing to show for it: Financial Distress and Re-Enrollment Aspirations for those with non-degreed debt," Research in Higher Education, Springer;Association for Institutional Research, vol. 64(1), pages 1-32, February.
    6. Kramer, Dennis A. & Lamb, Christina & Page, Lindsay C., 2021. "The effects of default choice on student loan borrowing: Experimental evidence from a public research university," Journal of Economic Behavior & Organization, Elsevier, vol. 189(C), pages 470-489.
    7. Kasey J. Eickmeyer & Wendy D. Manning & Monica A. Longmore & Peggy C. Giordano, 2023. "Exploring the Married-Cohabiting Income Pooling Gap Among Young Adults," Journal of Family and Economic Issues, Springer, vol. 44(4), pages 990-1006, December.

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