Hardships Associated with Student Debt in Low- to Moderate-Income Households

Background:  A primary goal for many school social workers and programs that serve adolescent populations is to help young people graduate from high school and go to college. However, the cost of attending college has skyrocketed in the last 3 decades resulting in staggering increases in the number and amount of loans disbursed. More than 40 million Americans have at least one student loan, and the total amount owed exceeds $1.2 trillion (Experian, 2014). While loans afford millions the ability to attend higher education institutions and help to propel low-income students into the middle class, student debt may have negative consequences, especially among low- to moderate-income households.

Methods:  As part of Refund to Savings, an initiative between academia and Intuit, Inc., 20,816 qualified low- to moderate-income tax filers took detailed household financial surveys immediately after filing taxes with free online software, and 8,484 took the same survey 6 months later. Student debt survey data were combined with demographic and tax data to create statistical models to predict material hardships 6 months later. The seven hardship measures were: difficulty covering expenses, not being able to afford rent or mortgage, skipping bills, not getting medical care when needed, not getting necessary dental care, not filling needed prescription drugs, and food insecurity. After exclusions, the analytical sample consisted of 6,966 respondents. Independent variables of interest were the presence and amount of student debt.  We calculated propensity scores and weighted individuals by the inverse (Hirano & Imbens, 2001) to balance groups on observed factors associated with student debt: educational attainment, current student status, income, age, sex, race, and number of adults in the household.  Each hardship measure functioned as an outcome in a binary logistic regression.

Results:  More than half of the sample owed student loans averaging $35,820.  About 44% of respondents had a college degree or higher level of education, and 38% had “some college.” Respondents with student loans were 87% more likely to experience any kind of material hardship during the 6-month follow-up than those without student loans. They were 64% more likely to report difficulty covering monthly expenses, twice as likely to skip bill payments, and 56% more likely to be unable to make rent or mortgage payments. Those with student debt were also 49% more likely to skip necessary medical care, 45% more likely to skip necessary dental care, 33% more likely not to fill prescriptions, and 40% more likely to experience food insecurity.

Conclusions/Implications:  Among low- to moderate-income households, student debt is associated with substantially increased risk for experiencing material hardships. From a systems perspective, social workers should engage in the student debt issue from multiple levels. Firstly, social workers should assist clients considering college by helping them weigh the costs and benefits of a college education. Secondly, social workers should promote policies that seek to reduce student debt burdens. Such policies could include improving access to low- or no-cost higher education, helping families save for school well in advance, and stricter criteria for evaluating institutions before disbursing loans.