Document Tag: student debt / loans

Financial Stress Among College Students: New Data About Student Loan Debt, Lack of Emergency Savings, Social and Personal Resources (2024)

We provide updated results about the link between student loan debt and emergency savings with financial
stress, and after conditioning for differences in social
and personal resources. We use the stress process
model framework and data from the 2020 Study on
Collegiate Financial Wellness (N = 25,310) to estimate
ordered probit regression models. The 2020 data confirm that students report higher levels of stress if they
hold more loan debt and have lower emergency savings. Students with higher levels of financial socialization and financial self-efficacy experience less financial
stress and experience more stress when they report
both positive and negative financial management
behaviors. Among student-borrowers, the role of social
and personal resources is weakened. The data confirm
ongoing financial stress among college students and
points to the important role of financial socialization
through parents and financial skill in students’ ability
to cope with financial stress.

The racial wealth gap, financial aid, and college access (2023)

We examine how the racial wealth gap interacts with financial aid in American higher education to generate a disparate impact on college access and outcomes. Retirement savings and home equity are excluded from the formula used to estimate the amount a family can afford to pay. All else equal, omitting those assets mechanically increases the financial aid available to families that hold them. White families are more
likely to own those assets and in larger amounts. We document this issue and explore its relationship with observed differences in college attendance, types of institutions attended, degrees attained, and education debt using data from the Survey of Consumer Finances (SCF), the National Postsecondary Student Aid Study (NPSAS), and the Panel Study of Income Dynamics (PSID). We show that this treatment of assets provides an implicit subsidy worth thousands of dollars annually to students from families with above-median incomes. White
students receive larger subsidies relative to Black students and Hispanic students with similar family incomes, and this gap in subsidies is associated with disadvantages in educational advancement and student loan levels. It may explain 10 percent to 15 percent of white students’ advantage in these outcomes relative to Black students and Hispanic students.

A Matter of Trust: Applying Insights From Social Psychology to Make College Affordable (2016)

The rising price of higher education threatens educational opportunity and social mobility for the most vulnerable Americans.
Increasing college attendance benefits individuals and society, but efforts to reduce the price via financial aid rely primarily on
economic theory: emphasizing short-term investments for long-term gains, and aiming for efficiency by targeting a narrow band
of the population. Yet financial aid as currently implemented fails to effectively counter price barriers to college attainment.
We argue that these failures are due, in part, to policies that were built on a narrow set of behavioral assumptions about
the role of pricing in individuals’ decisions to attend college. Insights from social psychology highlight decisions’ relational
processes and contexts. Existing policy failures have eroded public trust in financial aid as a legitimate, viable mechanism for
college affordability. Cost-effective reforms that rebuild trust are a promising direction for future policy making.