Association for Public Policy Analysis & Management

Existing research strongly suggests that student loan debt (SLD) is negatively associated with a household’s financial well-being, and that the relationship between SLD and financial hardship likely exists and is significant; however, the research falls short of providing greater systematic evidence. I use the household-level Federal Reserve Board’s (FRB) Survey of Consumer Finances (SCF) to investigate this relationship and analyze whether this form of personal debt is a driver of financial hardship. In my analysis, I define financial hardship by the inability to save, the making of late bill payments, and other measures that indicate financial instability. I hypothesize that SLD, and higher SLD-to-income burdens, reduces households' ability to save and weather adverse income shocks, thus leaving these households more financially vulnerable. My research builds on the few studies that have considered this relationship, and I innovate in that I examine new outcome variables (i.e. different measures that indicate a household’s financial hardship). My research design will consist of two layers of analysis: the first is providing a novel theoretical framework that examines the link between household student loan debt and household financial hardship, and second, I will conduct a large empirical analysis of a nationally representative sample of U.S. households. My initial results suggest this relationship is significant, but it is not yet clear to what extent SLD is driving hardship and how exactly (evidence for my hypothesis).