The Impact of Financial Education on Community College Student-Loan Debt

Graduation date: 2016Access restricted to the OSU Community, at author's request, from June 6, 2016 - June 6, 2018The student-loan market has surpassed 1.3 trillion dollars; rising student-loan cohort\ud default rates are a growing concern among educational institutions. Many colleges are\ud implementing financial-education programs for students to help increase their knowledge,\ud aptitude, and skills so they may become informed consumers.\ud \ud Purpose/Objective/Research Question/Focus of Study: The purpose of this quantitative\ud study was to examine the influence of financial education on community college students' loan borrowing decisions. Other variables evaluated included demographic characteristics (such as age, dependency status, enrollment status, ethnicity, first generation, gender, income, marital status, Pell grant, and/or veteran status) and completion of a financial-education course related to student-loan indebtedness.\ud \ud Setting and Population/Participants/Subjects: A community college in Oregon provided\ud the site for this study. Federal financial-aid student-loan records and demographic data were\ud collected from the college.\ud \ud Intervention/Program/Practice: The intervention involved a Personal Finance course\ud (BA218) and/or a Financial Survival for College Students course (CG114). Groups of students were divided into those who completed BA218, those who completed CG114, those who completed both courses, and those who did not complete any financial-education course.\ud \ud Research Design: A quasi-experimental study was conducted that compared the four\ud groups of federal student-loan borrowers as related to program intervention. The study\ud endeavored to evaluate whether a relationship existed among demographics variables, course completion and student-loan indebtedness.\ud \ud Data Collection and Analysis: The populations sampled were federal financial-aid\ud students who had applied for, and received, subsidized or unsubsidized student loans from the community college. Some student participants did not complete a financial-education course; others completed one or both financial-education courses. A one-way ANOVA was computed for all four student-loan-borrower groups to determine if the independent variables had a relationship with either completion or non-completion of financial-education courses. A\ud regression model was also computed to determine the best predictor of completion of a financial-education course and its relationship to the dependent variables. The data analysis included t-tests and cross tabulations, which are descriptive statistics. Cross tabulations were done to determine the associations between the financial-education interventions and the demographic variables.\ud \ud Findings: The study concluded that completion of either, or both, financial-education\ud courses would affect overall student-loan indebtedness, but in a negative direction. Those\ud students who completed one or more financial-education courses tended to have higher student-loan debt than those who did not complete such courses. Gender, first generation, and Pell-grant recipients had the strongest relationships with completion of financial-education course and higher student-loan indebtedness within all groups analyzed.\ud \ud Conclusions/Recommendations: This study resulted in rejection of the null hypothesis\ud that completion of a financial-education course(s) would not affect overall student-loan\ud indebtedness for students who had completed the financial-education course. In fact, results\ud demonstrated those who completed the course had a significantly higher student-loan debt than those who did not complete any financial-education course. Although, these results were unanticipated, they indicated that these interventions do not appear to be having the desired impact. Such a result may have occurred for several reasons. It may be that these financial-education courses were simply not effective. Alternatively, it may be that only the most needy students enroll in such a course, and completion of a financial-education course does not reduce the student-loan debt as compared to that of the average student. Through this study it was anticipated that financial education could be a solution to reducing student borrowing. Although the results did not provide the evidence to support this strategy, it did identify the need for further research; to assess the effectiveness of financial-education courses, the adult learning theories applied in the courses, and the training received by instructors who teach the courses. Financial-education cannot be the only strategy used by policy makers, administrators, and colleges to curb or slow down student-loan borrowing. Other measures should be considered such as enhancing the frequency of student disclosure statements. Such disclosure would increase students' awareness of how much they have borrowed. Another strategy would be to increase the funding for students to work on campus to pay off their education expenses. With soaring tuition costs and decreasing affordability to attend college, policymakers and college administrators need to take action now! If measures are not put into place the student-loan market may be the next financial bubble to burst and threaten the United States economy