Nothing to Show for It: Non-Degreed Debt and the Financial Conditions Associated with It

Background. While student loans are generally considered a productive form of debt with respect to earnings potential, student debt has also been associated with lower homeownership rates, lower levels of financial assets, reduced consumption rates, greater incidences of hardship, and delays in family formation. Concurrently, the proportion of borrowers who do not earn their degrees has also been growing. Yet, despite the prevalence and uneven distribution of degree non-completion and student debt, there is little research at the convergence of these two phenomena. We address this gap by comparing financial and outcomes of student debt-holders who started college but did not earn a degree—those with non-degreed debt (NDD)—with those of similar individuals with a high school diploma (HSD) who did not attend college, and did not take on student debt.

Methods. Our sample consists of low- and moderate-income (LMI) tax filers who completed the 2017 Household Financial Survey (N=3,404). The survey collected detailed information on key demographic and financial household characteristics, including educational attainment, student debt, employment, and asset ownership. Survey data were merged with administrative tax and income records. Although we cannot completely control for the decisions to pursue post-secondary education, take on student debt, and leave school before graduating, we utilize propensity score methods and machine learning to balance individuals with NDD and individuals with HSDs on a variety of demographic and economic measures that are related to educational attainment, student debt, and the financial outcomes under study. We are thus able to compare an array of financial outcomes—such as material and healthcare hardships, financial difficulties, financial anxiety and well-being, and future expectations of earnings and college enrollment—across the two groups of similar individuals.

Results. We find that individuals with NDD had greater odds of experiencing material and healthcare hardships, as well as financial difficulties when compared to high school graduates with no student debt. Individuals with NDD also had greater financial anxiety and lower levels of financial well-being. Despite these challenges, individuals with NDD were more optimistic than high school graduates concerning future college enrollment and earnings.

Conclusions and Implications. Our research findings have significant implications for financial aid policies, student debt repayment policies, and colleges’ and universities' retention and re-enrollment efforts. The study aims to deepen the policy discourse concerning student debt by addressing the circumstances of borrowers who must repay debt for an experience that fails to engender an earnings premium—those that having nothing to show for it.