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New NEFE Research: Debt By Degrees

Posted October 8, 2019 by Sarah Volk

New research funded by the National Endowment for Financial Education (NEFE) investigates financial inequality and insecurity among Americans from age 20 to 30, focusing on individual and household education attainment and the types of debt held. The study, conducted by The Ohio State University, suggests that while debt does not always become an unbearable burden, it makes young adults more vulnerable to financial problems when troubles do arise.

Community college attendees are at the forefront of this vulnerability. More diverse and often from lower-income family backgrounds, they represent a financially precarious population attempting to get ahead by investing in postsecondary education. On average, they are more likely to start school later and stay in school longer despite a shorter overall degree program—only 39 percent have earned a two-year degree within six years of starting. Furthermore, individuals who obtain an associate degree carry differing portfolios of debt and the greatest financial burdens, relative both to bachelor’s degree holders and individuals who never enrolled in college.

Most data and assumptions about college focus on bachelor’s degrees, but these are not universally translatable to two-year degree pursuers. Understanding their unique challenges forces the field to treat them as a distinct group rather than lumping them in with traditional four-year students.

When compared to other degree holders, those with an associate degree:

  • Have more exposure to vehicle and credit card debt and a higher rate of loan delinquency.
  • Are more likely to pay higher interest rates on student loans.
  • Were hardest hit during the Great Recession.
  • Are more likely to have experienced other major life events such as marriage and childbearing during the same period that they are pursuing educational credentials.

In delivering financial education for community college students, there is an opportunity to address situations common to their experience. Individuals seeking an associate’s degree are a distinct group that deserve consideration, especially when it comes to the financial education resources that colleges provide.

Executive Summary: Debt by Degrees: Educational Attainment and Debt Profiles