Tuesday, May 24, 2016

New study finds negative correlation between student loan debt and wealth accumulation

The study by conducted by University of Illinois researchers focused on the relationship between college grads (not law students), educational loan debt and wealth accumulation.  The study has been published in the journal Children and Youth Services Review, available here, and is also summarized here in the science news blog EurekAlert. The following is the study abstract:

With the use of education loans growing rapidly as a way to finance college education, it is important to examine how such loans impact the future financial well-being. This study examines the association between education loans and postcollege wealth accumulation among young adults, the group with the greatest share of outstanding education loans. Data come from 15 rounds of data of the 1997 National Longitudinal Survey of Youth, and the analyses control for a number of student characteristics, college experiences, and parental income. Results from a treatment-effects model indicate that having education loans upon leaving college is negatively related to postcollege net worth, financial assets, nonfinancial assets, and value of primary housing. Furthermore, having education loans also has an additional negative link to the value of net worth among Black young adults. The relationship between the amount of education loans and wealth accumulation is not statistically significant among those with outstanding loans. The study findings indicate the importance of developing alternative approaches, instead of additional loans and other credits, to meet the financial needs of college students.

Hat tip to Inside Higher Ed.



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