The Effect of Student Loan Debt on Emergency Savings and the Moderating Role of Financial Knowledge: Evidence from the U.S. Survey of Household Economics and Decisionmaking

Thomas Korankye (), Blain Pearson and Peter Agyemang-Mintah
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Thomas Korankye: Personal and Family Financial Planning Program, Norton School of Human Ecology, University of Arizona, Tucson, AZ 85721, USA
Blain Pearson: Department of Finance and Economics, Coastal Carolina University, Conway, SC 29526, USA
Peter Agyemang-Mintah: College of Business, Zayed University, Abu Dhabi P.O. Box 144534, United Arab Emirates

JRFM, 2024, vol. 17, issue 9, 1-18

Abstract: This study examines data from the U.S. 2018 and 2019 Survey of Household Economics and Decision making (SHED) to understand the association between student loan debt and emergency-saving decisions, including the moderating role of financial knowledge. Controlling self-selection bias through a propensity score and coarsened exact matching approach, the findings reveal that individuals with student loan debt are less likely to save for financial emergencies. The findings also show that financial knowledge is positively associated with a higher likelihood of having emergency savings. Furthermore, the results from the moderating analysis indicate a statistically significant interaction effect. Based on the empirical results and the corresponding interaction plots, the findings suggest that targeted financial education may lead to improved financial outcomes for student loan borrowers, rather than assuming that such education occurred prior to a loan application.

Keywords: coarsened exact matching; emergency fund; emergency savings; financial literacy; propensity score matching; student loan debt (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
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