The Determinants of Education Loans: Evidence from the 2013 Survey of Consumer Finances

The Point: This empirical analysis explores the household characteristics that predict the presence, magnitude, and deferral of education loans. By conducting regression analyses on the Survey of Consumer Finances, we interpret how education debt relates to a variety of factors in covariate classes of Education; Demographics; Spending Behavior and Accounts; as well as Employment, Income, and Wealth.

We find that several household characteristics have significant relationships with the instance of education loans, the level of education debt, and the instance of education loan deferral. Of particular interest are the characteristics embedded within the Demographics and Spending Behavior & Accounts covariate classes as they explain a considerable amount of variance in each model. We see that there is notable heterogeneity in the ways in which different sections of the population interact with education financing. These diverse associations with education loans suggest that the federal government policy of tertiary education subsidization through loan servicing is problematic if the goal is to equally promote educational advancement across all socio-economic strata and segments of the population. The diverse impacts likely depend on subpopulation tendencies in risk aversion, generational macroeconomic conditions, and social mobility limitations.

The Quote: "The financialization of tertiary education expenses holds many implications for consumption and saving habits as well as broader implications regarding socio-economic inequalities that dampen the notion of education as 'the great equalizer.'"

Questions: How does the US household population interact with education loans? Who is indebted, and to what degree?

Data: Cross-sectional dataset from the Survey of Consumer Finances sponsored by the Federal Reserve Bank Board of Governers, regarded as the most integral, nationally-representative record of American household balance sheets.