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

Gicheva, Dora; Thompson, Jeffrey P.

doi:10.17848/9780880994873.ch9

Cited by 36 publications

(38 citation statements)

References 22 publications

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“…However, 41 percent of those starting college fail to complete their degree within 6 years (as reported at https://nces.ed.gov/fastfacts/display.asp?id=40). Gicheva and Thompson (2015) and show that student loan debt is primarily an issue for those who do not receive their degree. For those who graduate, higher income offsets the impact of the debt and there is no net effect on homeownership.…”

Section: What Factors Caused the Changes Over Time?mentioning

confidence: 99%

Homeownership and the American Dream

Goodman

Mayer

2018

Journal of Economic Perspectives

186

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For decades, it was taken as a given that an increased homeownership rate was a desirable goal. But after the financial crises and Great Recession, in which roughly eight million homes were foreclosed on and about $7 trillion in home equity was erased, economists and policymakers are re-evaluating the role of homeownership in the American Dream. Many question whether the American Dream should really include homeownership or instead focus more on other aspects of upward mobility, and most acknowledge that homeownership is not for everyone. We take a detailed look at US homeownership from three different perspectives: 1) an international perspective, comparing US homeownership rates with those of other nations; 2) a demographic perspective, examining the correlation between changes in the US homeownership rate between 1985 and 2015 and factors like age, race/ethnicity, education, family status, and income; 3) and, a financial benefits perspective, using national data since 2002 to calculate the internal rate of return to homeownership compared to alternative investments. Our overall conclusion: homeownership is a valuable institution. While two decades of policies in the 1990s and early 2000s may have put too much faith in the benefits of homeownership, the pendulum seems to have swung too far the other way, and many now may have too little faith in homeownership as part of the American Dream.

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Section: What Factors Caused the Changes Over Time?mentioning

confidence: 99%

Homeownership and the American Dream

Goodman

Mayer

2018

Journal of Economic Perspectives

186

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“…Using an experiment involving financial aid assignment at a top program, Field (2009) finds that law students' career choices are also sensitive to holding education debt in a way that is consistent with a psychic or social cost of debt. A negative relationship between student debt and household financial stability is found in Gicheva and Thompson (2015) , while Brown and Caldwell (2013) use descriptive statistics from the Federal Reserve Bank of New York Consumer Credit Panel/Equifax data set to show that between 2008 and 2012 homeownership rates fell faster for 30-year olds with student debt compared to similarly aged individuals without education loans. In addition, during the same time period holding student loans is associated with lower Equifax credit scores for 25 and 30 year-old individuals.…”

Section: Introductionmentioning

confidence: 99%

Student loans or marriage? A look at the highly educated

Gicheva

2016

Economics of Education Review

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“…One concern is that rising rates of delinquency reflect excessive borrowing and overextended finances, which could impair students' abilities to finance first homes and to live independently of their families, or could constrain their occupational choices, reducing rates of homeownership and marriage, or entrepreneurial risk taking (Baum (2015), Bleemer, Brown, Lee, and van der Klaauw (2014), Field (2014), Gicheva (2013), Gicheva and Thompson (2014), Ionescu (2009), Ionescu (2011), Marx and Turner (2015), Mezza, Sommer, and Sherlund (2014), Shao (2014).) If, instead, a shift toward riskier borrowers with weaker labor market prospects is driving rising default rates, then it may be less surprising that student loan borrowers are less likely to be homeowners or to be constrained in their occupational choices.…”

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confidence: 99%

A Crisis in Student Loans?: How Changes in the Characteristics of Borrowers and in the Institutions They Attended Contributed to Rising Loan Defaults

Looney¹,

Yannelis²

2015

Brookings Papers on Economic Activity

197

161

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*This paper examines the rise in student loan delinquency and default drawing on a unique set of administrative data on federal student borrowing, matched to earnings records from de-identified tax records. Most of the increase in default is associated with the rise in the number of borrowers at for-profit schools and, to a lesser extent, 2-year institutions and certain other non-selective institutions, whose students historically composed only a small share of borrowers. These non-traditional borrowers were drawn from lower income families, attended institutions with relatively weak educational outcomes, and experienced poor labor market outcomes after leaving school. In contrast, default rates among borrowers attending most 4-year public and non-profit private institutions and graduate borrowers-borrowers who represent the vast majority of the federal loan portfolio-have remained low, despite the severe recession and their relatively high loan balances. Their higher earnings, low rates of unemployment, and greater family resources appear to have enabled them to avoid adverse loan outcomes even during times of hardship. Decomposition analysis indicates that changes in characteristics of borrowers and the institutions they attended are associated with much of the doubling in default rates between 2000 and 2011. Changes in the type of schools attended, debt burdens, and labor market outcomes of non-traditional borrowers at for-profit and 2-year colleges explain the largest share.JEL Classification: D14, E24, I23, G28, H52, H81

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

Cited by 36 publications

References 22 publications

Homeownership and the American Dream

Homeownership and the American Dream

Student loans or marriage? A look at the highly educated

A Crisis in Student Loans?: How Changes in the Characteristics of Borrowers and in the Institutions They Attended Contributed to Rising Loan Defaults

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