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


  • Gicheva, Dora

    () (University of North Carolina at Greensboro, Department of Economics)

  • Thompson, Jeffrey

    () (Federal Reserve Board)


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.

Suggested Citation

  • Gicheva, Dora & Thompson, Jeffrey, 2014. "The Effects of Student Loans on Long-Term Household Financial Stability," UNCG Economics Working Papers 14-2, University of North Carolina at Greensboro, Department of Economics.
  • Handle: RePEc:ris:uncgec:2014_002

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    References listed on IDEAS

    1. Kahn, Lisa B., 2010. "The long-term labor market consequences of graduating from college in a bad economy," Labour Economics, Elsevier, vol. 17(2), pages 303-316, April.
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    3. Duca John V. & Rosenthal Stuart S., 1993. "Borrowing Constraints, Household Debt, and Racial Discrimination in Loan Markets," Journal of Financial Intermediation, Elsevier, vol. 3(1), pages 77-103, October.
    4. Erica Field, 2009. "Educational Debt Burden and Career Choice: Evidence from a Financial Aid Experiment at NYU Law School," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 1-21, January.
    5. Matthew T. Johnson, 2013. "The Impact of Business Cycle Fluctuations on Graduate School Enrollment," Mathematica Policy Research Reports 77da29f047574fbfb5f216d63, Mathematica Policy Research.
    6. Bazzoli, Gloria J., 1985. "Does educational indebtedness affect physician specialty choice?," Journal of Health Economics, Elsevier, vol. 4(1), pages 1-19, March.
    7. Christopher Avery & Thomas J. Kane, 2004. "Student Perceptions of College Opportunities. The Boston COACH Program," NBER Chapters,in: College Choices: The Economics of Where to Go, When to Go, and How to Pay For It, pages 355-394 National Bureau of Economic Research, Inc.
    8. Christopher Avery & Sarah Turner, 2012. "Student Loans: Do College Students Borrow Too Much--Or Not Enough?," Journal of Economic Perspectives, American Economic Association, vol. 26(1), pages 165-192, Winter.
    9. Rothstein, Jesse & Rouse, Cecilia Elena, 2011. "Constrained after college: Student loans and early-career occupational choices," Journal of Public Economics, Elsevier, vol. 95(1-2), pages 149-163, February.
    10. Lee Hansendn, W. & Rhodes, Marilyn S., 1988. "Student debt crisis: Are students incurring excessive debt?," Economics of Education Review, Elsevier, vol. 7(1), pages 101-112, February.
    11. Duca, John V. & Rosenthal, Stuart S., 1994. "Borrowing constraints and access to owner-occupied housing," Regional Science and Urban Economics, Elsevier, vol. 24(3), pages 301-322, June.
    12. Johnson, Matthew T., 2013. "The impact of business cycle fluctuations on graduate school enrollment," Economics of Education Review, Elsevier, vol. 34(C), pages 122-134.
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    More about this item


    student debt; personal bankruptcy; homeownership;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality

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