Student Loan Debt and Household Financial Hardship: Analysis Using the 2016 Survey of Consumer Finances

Abstract

Existing research documents negative economic impacts from student loan debt (SLD) on household financial well-being. Using the household-level Federal Reserve Board’s Survey of Consumer Finances dataset from 2016, I analyze whether this form of personal debt drives financial hardship. In my analysis, I define financial hardship by having been denied credit, by having made late bill payments, and other measures that indicate financial instability. I hypothesize that as households’ income and savings are reduced per SLD payments, leaving them more financially vulnerable, households with SLD will be at an increased likelihood of experiencing financial hardship. My research design consists of two layers of analysis. First, I explore a household debt theoretical framework to examine the link between student loan debt and household financial hardship. Second, I test my key theoretical predictions in empirical models using the 2016 Survey of Consumer Finances dataset. My results suggest that SLD is positively associated with an increased likelihood of various measures of financial hardship. Though SLD is positively associated with an increased likelihood to have savings, when analyzing households who save, households with more in SLD are associated with less in savings.