IDEAS home Printed from https://ideas.repec.org/p/fip/fedgfe/2014-90.html
   My bibliography  Save this paper

Does education loan debt influence household financial distress? An assessment using the 2007-09 SCF Panel

Author

Listed:

Abstract

This paper uses the recent 2007-09 SCF panel to examine the influence of student loans on financial distress. Families with student loans in 2007 have higher levels of financial distress than families without such loans, and these families were more susceptible to transitions to financial distress during the early stages of the Great Recession. This correlation persists once we control for a host of other demographic, work-status, and household balance sheet measures. Families with an average level of student loans were 3.1 percentage points more likely to be 60 days late paying bills and 3 percentage points more likely to be denied credit. During this same time period, families with other types of consumer debt were no more or less likely to be financially distressed. Education loans enable students to go to college and improve their employment and earnings prospects. On average, families with education loans in the 2007-09 SCF saw higher income growth between surveys. Further, the value of completing a degree is evident in the data: families without a degree but with education debt drive much of the correlations between financial distress and education loans.

Suggested Citation

  • Jesse Bricker & Jeffrey P. Thompson, 2014. "Does education loan debt influence household financial distress? An assessment using the 2007-09 SCF Panel," Finance and Economics Discussion Series 2014-90, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2014-90
    as

    Download full text from publisher

    File URL: http://www.federalreserve.gov/econresdata/feds/2014/files/201490pap.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Pedro Carneiro & James J. Heckman & Edward Vytlacil, 2010. "Evaluating Marginal Policy Changes and the Average Effect of Treatment for Individuals at the Margin," Econometrica, Econometric Society, vol. 78(1), pages 377-394, January.
    2. Gregorio Caetano & Miguel Palacios & Harry A. Patrinos, 2019. "Measuring Aversion to Debt: An Experiment Among Student Loan Candidates," Journal of Family and Economic Issues, Springer, vol. 40(1), pages 117-131, March.
    3. Jesse Bricker & Brian K. Bucks & Arthur Kennickell & Traci L. Mach & Kevin Moore, 2011. "Drowning or Weathering the Storm? Changes in Family Finances from 2007 to 2009," NBER Working Papers 16985, National Bureau of Economic Research, Inc.
    4. Erica Field, 2009. "Educational Debt Burden and Career Choice: Evidence from a Financial Aid Experiment at NYU Law School," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 1-21, January.
    5. Jesse Bricker & Brian Bucks & Arthur B. Kennickell & Traci L. Mach & Kevin B. Moore, 2011. "Surveying the aftermath of the storm: changes in family finances from 2007 to 2009," Finance and Economics Discussion Series 2011-17, Board of Governors of the Federal Reserve System (U.S.).
    6. Weiler, William C., 1994. "Expectations, undergraduate debt and the decision to attend graduate school: a simultaneous model of student choice," Economics of Education Review, Elsevier, vol. 13(1), pages 29-41, March.
    7. Jesse Bricker & Lisa J. Dettling & Alice Henriques Volz & Joanne W. Hsu & Kevin B. Moore & John Edward Sabelhaus & Jeffrey P. Thompson & Richard Windle, 2014. "Changes in U.S. Family Finances from 2010 to 2013: Evidence from the Survey of Consumer Finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), vol. 100(4), September.
    8. Lorenzo Cappellari & Stephen P. Jenkins, 2004. "Modelling low income transitions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(5), pages 593-610.
    9. Bazzoli, Gloria J., 1985. "Does educational indebtedness affect physician specialty choice?," Journal of Health Economics, Elsevier, vol. 4(1), pages 1-19, March.
    10. Rothstein, Jesse & Rouse, Cecilia Elena, 2011. "Constrained after college: Student loans and early-career occupational choices," Journal of Public Economics, Elsevier, vol. 95(1-2), pages 149-163, February.
    11. Christopher Avery & Sarah Turner, 2012. "Student Loans: Do College Students Borrow Too Much--Or Not Enough?," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 165-192, Winter.
    12. Tullio Jappelli, 1990. "Who is Credit Constrained in the U. S. Economy?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(1), pages 219-234.
    13. Mark B. Stewart & Joanna K. Swaffield, 1999. "Low Pay Dynamics and Transition Probabilities," Economica, London School of Economics and Political Science, vol. 66(261), pages 23-42, February.
    14. Schapiro, Morton Owen & O'Malley, Michael P. & Litten, Larry H., 1991. "Progression to graduate school from the "Elite" colleges and universities," Economics of Education Review, Elsevier, vol. 10(3), pages 227-244, September.
    15. Kevin Lang & Russell Weinstein, 2012. "Evaluating Student Outcomes at For-Profit Colleges," NBER Working Papers 18201, National Bureau of Economic Research, Inc.
    16. John V. Duca & Stuart S. Rosenthal, 1991. "An econometric analysis of borrowing constraints and household debt," Working Papers 9111, Federal Reserve Bank of Dallas.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Okechukwu D. Anyamele, 2018. "Racial Ethnic differences in Household Loan Delinquency Rate in recent financial crisis: Evidence from 2007 and 2010 Survey of Consumer Finances," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 8(3), pages 1-4.
    2. Alvaro Mezza & Kamila Sommer, 2015. "A Trillion Dollar Question: What Predicts Student Loan Delinquencies?," Finance and Economics Discussion Series 2015-98, Board of Governors of the Federal Reserve System (U.S.).
    3. Lisa J. Dettling & Sebastian Devlin-Foltz & Jacob Krimmel & Sarah Pack & Jeffrey P. Thompson, 2015. "Comparing Micro and Macro Sources for Household Accounts in the United States: Evidence from the Survey of Consumer Finances," Finance and Economics Discussion Series 2015-86, Board of Governors of the Federal Reserve System (U.S.).
    4. Gicheva, Dora & Thompson, Jeffrey, 2014. "The Effects of Student Loans on Long-Term Household Financial Stability," UNCG Economics Working Papers 14-2, University of North Carolina at Greensboro, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gicheva, Dora & Thompson, Jeffrey, 2014. "The Effects of Student Loans on Long-Term Household Financial Stability," UNCG Economics Working Papers 14-2, University of North Carolina at Greensboro, Department of Economics.
    2. 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.
    3. Gicheva, Dora, 2016. "Student loans or marriage? A look at the highly educated," Economics of Education Review, Elsevier, vol. 53(C), pages 207-216.
    4. Rothstein, Jesse & Rouse, Cecilia Elena, 2011. "Constrained after college: Student loans and early-career occupational choices," Journal of Public Economics, Elsevier, vol. 95(1-2), pages 149-163, February.
    5. Matthew S. Rutledge & Geoffrey T. Sanzenbacher & Francis M. Vitagliano, 2016. "How Does Student Debt Affect Early-Career Retirement Saving?," Working Papers, Center for Retirement Research at Boston College wp2016-9, Center for Retirement Research.
    6. Marx, Benjamin M. & Turner, Lesley J., 2020. "Paralysis by analysis? Effects of information on student loan take-up," Economics of Education Review, Elsevier, vol. 77(C).
    7. Adam M. Lavecchia & Heidi Liu & Philip Oreopoulos, 2014. "Behavioral Economics of Education: Progress and Possibilities," NBER Working Papers 20609, National Bureau of Economic Research, Inc.
    8. Ferretti, Fabrizio & Jones, Simon & McIntosh, Bryan, 2015. "Economic growth and the harmful effects of student loan debt on biomedical research," Economic Modelling, Elsevier, vol. 49(C), pages 308-313.
    9. Pigini, Claudia & Presbitero, Andrea F. & Zazzaro, Alberto, 2016. "State dependence in access to credit," Journal of Financial Stability, Elsevier, vol. 27(C), pages 17-34.
    10. Rajeev Darolia, 2013. "Student Loan Repayment and College Accountability," Consumer Finance Institute discussion papers 13-5, Federal Reserve Bank of Philadelphia.
    11. Brent J. Evans & Angela Boatman & Adela Soliz, 2019. "Framing and Labeling Effects in Preferences for Borrowing for College: An Experimental Analysis," Research in Higher Education, Springer;Association for Institutional Research, vol. 60(4), pages 438-457, June.
    12. Rajeev Darolia, 2015. "Messengers of Bad News or Bad Apples? Student Debt and College Accountability," Education Finance and Policy, MIT Press, vol. 10(2), pages 277-299, March.
    13. James Monks, 2014. "The Role of Institutional and State Aid Policies in Average Student Debt," The ANNALS of the American Academy of Political and Social Science, , vol. 655(1), pages 123-142, September.
    14. Silvia Magri & Valentina Michelangeli & Sabrina Pastorelli & Raffaella Pico, 2019. "The expansion of consumer credit in Italy and in the Euro Area: what are the drivers and the risks?," Questioni di Economia e Finanza (Occasional Papers) 500, Bank of Italy, Economic Research and International Relations Area.
    15. Steven A. Boutcher & Jason N. Houle & Anna Raup‐Kounovksy & Carroll Seron, 2023. "A Faustian bargain? Rethinking the role of debt in law students' career choices," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 20(1), pages 166-195, March.
    16. 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.
    17. Stella Min & Miles G. Taylor, 2018. "Racial and Ethnic Variation in the Relationship Between Student Loan Debt and the Transition to First Birth," Demography, Springer;Population Association of America (PAA), vol. 55(1), pages 165-188, February.
    18. Thomas Meissner, 2016. "Intertemporal consumption and debt aversion: an experimental study," Experimental Economics, Springer;Economic Science Association, vol. 19(2), pages 281-298, June.
    19. Mi Luo & Simon Mongey, 2019. "Assets and Job Choice: Student Debt, Wages and Amenities," NBER Working Papers 25801, National Bureau of Economic Research, Inc.
    20. Juan Esteban Saavedra & Carlos Medina, 2012. "Formación para el Trabajo en Colombia," Borradores de Economia 10059, Banco de la Republica.

    More about this item

    Keywords

    Student loans; financial distress;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedgfe:2014-90. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ryan Wolfslayer ; Keisha Fournillier (email available below). General contact details of provider: https://edirc.repec.org/data/frbgvus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.