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Is student debt jeopardizing the short-term financial health of U.S. households?

Author

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  • William Elliott
  • IlSung Nam

Abstract

In this study, the authors use the Survey of Consumer Finances to determine whether student loans are associated with household net worth. They find that median 2009 net worth ($117,700) for households with no outstanding student loan debt is nearly three times higher than for households with outstanding student loan debt ($42,800). Further, multivariate statistics indicate that households with outstanding student loan debt and a median 2007 net worth of $128,828 incur a loss of about 54 percent of net worth in 2009 compared with households with similar net worth levels but no student loan debt over the same period. The main policy implication of this study is that outstanding student debt may jeopardize the short-run financial health of households. However, this topic is complex and more research is needed before suggesting policy prescriptions.

Suggested Citation

  • William Elliott & IlSung Nam, 2013. "Is student debt jeopardizing the short-term financial health of U.S. households?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 405-424.
    • Handle: RePEc:fip:fedlrv:y:2013:i:september:p:405-424:n:v.95no.5
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    References listed on IDEAS

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    1. Keister,Lisa A., 2000. "Wealth in America," Cambridge Books, Cambridge University Press, number 9780521627511, October.
    2. Minicozzi, Alexandra, 2005. "The short term effect of educational debt on job decisions," Economics of Education Review, Elsevier, vol. 24(4), pages 417-430, August.
    3. Gicheva, Dora, 2011. "Does the Student-Loan Burden Weigh into the Decision to Start a Family?," UNCG Economics Working Papers 11-14, University of North Carolina at Greensboro, Department of Economics.
    4. Keister,Lisa A., 2000. "Wealth in America," Cambridge Books, Cambridge University Press, number 9780521621687, October.
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    Cited by:

    1. Qun Zhang & Hyungsoo Kim, 2019. "American Young Adults’ Debt and Psychological Distress," Journal of Family and Economic Issues, Springer, vol. 40(1), pages 22-35, March.
    2. Margaret S. Sherraden & Michal Grinstein-Weiss, 2015. "Creating Financial Capability in the Next Generation: An Introduction to the Special Issue," Journal of Consumer Affairs, Wiley Blackwell, vol. 49(1), pages 1-12, March.
    3. William Elliott & Michal Grinstein-Weiss & Melinda Lewis & IlSung Nam, 2014. "Student Loan Debt: Can Parental College Savings Help?," Review, Federal Reserve Bank of St. Louis, vol. 96(4), pages 331-357.
    4. 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.
    5. Jinhee Kim & Swarn Chatterjee, 2019. "Student Loans, Health, and Life Satisfaction of US Households: Evidence from a Panel Study," Journal of Family and Economic Issues, Springer, vol. 40(1), pages 36-50, March.
    6. Berrak Bahadir & Dora Gicheva, 2022. "Macroeconomic Implications of Student Debt: A State‐Level Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(8), pages 2273-2300, December.
    7. Despard, Mathieu R. & Perantie, Dana & Taylor, Samuel & Grinstein-Weiss, Michal & Friedline, Terri & Raghavan, Ramesh, 2016. "Student debt and hardship: Evidence from a large sample of low- and moderate-income households," Children and Youth Services Review, Elsevier, vol. 70(C), pages 8-18.
    8. José Alberto Fuinhas & Victor Moutinho & Estefano Silva, 2019. "Delinquency and Default in USA Student Debt as a Proportional Response to Unemployment and Average Debt per Borrower," Economies, MDPI, vol. 7(4), pages 1-16, October.
    9. 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.
    10. William Elliott & Melinda Lewis, 2015. "Student Debt Effects On Financial Well-Being: Research And Policy Implications," Journal of Economic Surveys, Wiley Blackwell, vol. 29(4), pages 614-636, September.
    11. Ray Boshara & William R. Emmons, 2015. "A Balance Sheet Perspective on Financial Success: Why Starting Early Matters," Journal of Consumer Affairs, Wiley Blackwell, vol. 49(1), pages 267-298, March.

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    Keywords

    Student loans; Households - Finance;

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