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Explaining Individuals¡¯ Behavior towards Their Acquisition of Students¡¯ Loan in the US

Asare Eric and Eduardo Segarra ()

Applied Economics and Finance, 2017, vol. 4, issue 3, 102-110

Abstract: This study investigates the behavior of individuals in the US regarding the amount of student loans they might borrow with a two-part model. The model was estimated using the 2013 Survey of Consumer Finance (SCF) data, collected by the Governors of the Federal Reserve System, US, in collaboration with the Statistics and Income Division of the Internal Revenue Service, US. The sampling and imputation errors that are associated with the SCF data were accounted for in the model estimation process to ensure reliable inferences. Old age (41 years and older), previous experience with bankruptcy, attitude towards borrowing to finance education, being Hispanic, employment status, and wage salary were found to be significant variables that can influence the likelihood that a student will borrow a student loan and the amount he/she would borrow. This study also found out that using the SCF data without accounting for the inherent imputation and sampling errors, could lead to biased estimates and incorrect model inferences. The results of this study could help students¡¯ loan managers and other relevant stakeholders such as the Federal Government understand the behavior of potential borrowers of student loans to effectively manage the program.

Keywords: educational economics; educational finance; state and federal aid; two-part model (search for similar items in EconPapers)
Date: 2017
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Handle: RePEc:rfa:aefjnl:v:4:y:2017:i:3:p:102-110