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The Effects of Student Loans on Long-Term Household Financial Stability

Dora Gicheva and Jeffrey Thompson ()

No 14-2, UNCG Economics Working Papers from University of North Carolina at Greensboro, Department of Economics

Abstract: By examining how student borrowers fare financially after graduation, we attempt to further the existing knowledge of the costs associated with education debt and the manageability of the typical debt burden. We compare the financial stability of individuals who have borrowed for education to similar individuals who have not. We show that, keeping education constant, more student debt is associated with higher probability of being credit constrained and greater likelihood of declaring bankruptcy, particularly for individuals who accumulate debt but do not complete a Bachelor’s degree. We find evidence that homeownership rates may also be affected by education loans. Controlling for earnings tends to strengthen these relationships, which is consistent with omitted variable bias combined with positive return to student loans.

Keywords: student debt; personal bankruptcy; homeownership (search for similar items in EconPapers)
JEL-codes: D14 I22 I24 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2014-02-28
New Economics Papers: this item is included in nep-ban and nep-edu
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