Graduate Program

Family and Consumer Studies

Degree Name

Master of Science (MS)

Semester of Degree Completion

2008

Thesis Director

Linda Simpson

Thesis Committee Member

Lisa Taylor

Thesis Committee Member

Julie Chadd

Abstract

College student loan debt has become an increasing concern in recent years. There has been a steady increase in the number of students taking out loans and in the total amounts borrowed for a college education (CollegeBoard, 2006). The majority of college students will graduate with some amount of college debt, but some graduates leave school with much higher loan debt than others. It is important to examine what makes some students more willing to take on higher educational loan debts than other students.

The primary purpose of this study was to explore risk factors associated with educational debt and the effects of these risk factors on college freshmen's willingness to incur educational debt. Four risk factors were examined to see if they contributed to students becoming overly indebted: (a) lack ofloan knowledge, (b) poor money management skills, (c) liberal, debt-tolerant money attitudes, and (d) high expectations in earning potential of their chosen major. A secondary goal of this study was to determine if loan knowledge, money management skills, and debt tolerance attitudes affected the role of cost in the decision-making process of college choice.

A quantitative survey was given to 144 college freshmen at a mid-sized Midwest university. The survey instrnment was developed by the researcher and measured students' loan knowledge, money management skills, money attitudes to debt, and future estimated income projections. Descriptive statistics, relative frequencies, t-tests, and logistic regressive tests were used to analyze the data.

The results of this study indicate that students were not knowledgeable about their personal student loans and about student loans in general. Students were also overly optimistic in estimating their future income with over 50% of the students overestimating their future income for their major. Lack ofloan knowledge and overestimating future income has been related to high student loan debt (King & Frishberg, 2001) The results of this study indicate the value of studying the student bonower to identify risk factors that may lead to educational over indebtedness. Further studies on college students and their educational borrowing habits are needed so programs may be developed to address college loan indebtedness.

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