An Analysis of Student Credit Card Debt Determinants and Factors

The Permanent Income Hypothesis (PIH) derived by Milton Friedman in 1957 states that individuals will base their current consumption on what they consider to be their normal income. Normal income is derived by the individual\u27s current and expected future income. Credit cards have become prevalent among college campuses. Credit card issuers seek out students because of market saturation and the idea that students, are generally in independence limbo; still being supported by parents, yet regarded as legal adults. This study seeks to find if the PIH is valid amongst college students by using student credit card debt as a sort of proxy for consumption and their views on expected income upon graduation. A regression analysis will be performed on data that was collected via surveys testing the student\u27s credit card debt against a primary variable, expected income, and other explanatory variables. The results will show conflicting results due to the unique properties of the student population