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  • Student Loan Debt and Financial Stress: Implications for Academic Performance
  • Amanda R. Baker (bio) and Catherine P. Montalto (bio)

With the costs of college on the rise across the United States, many postsecondary educators are concerned about the potential effect of financial strain on student outcomes. Scholars have long hypothesized that students who are concerned about finances may demonstrate lower goal commitment, academic engagement, and persistence (Boatman & Long, 2016; Cabrera, Nora, & Castañeda, 1992; Nora, Barlow, & Crisp, 2006). High levels of student loan debt and financial stress have been associated with increases in students’ likelihood of dropping out, stopping out, or reducing their course loads (Dwyer, Hodson, & McCloud, 2013; Joo, Durband, & Grable, 2008; Robb, Moody, & Abdel-Ghany, 2012). Financial concerns have also been linked with extended time to degree (Letkiewicz et al., 2014), which can further escalate the costs of college.

The causal mechanisms linking financial concerns to college outcomes are not fully understood. Researchers have suggested that financial strain may reduce students’ motivation to complete college (Cabrera et al., 1992; Nora et al., 2006) or deplete the cognitive resources students have available to allocate to academic concerns (Northern, O’Brien, & Goetz, 2010), yet few studies have specifically examined the associations between financial concerns and academic performance. Furthermore, researchers have not yet distinguished the effects of high levels of financial stress from more moderate levels of financial stress. These questions have significant implications for student affairs practitioners, who are tasked with ensuring that financial concerns do not negatively affect students’ academic success.

Trends in student borrowing and financial stress vary between racial and ethnic groups and by gender, pointing to possible inequities in financial support for college. One study shows that Black bachelor’s degree recipients were more likely to have borrowed $30,000 or more in student loans, potentially reflecting lower access to other forms of financial support (Baum & Steele, 2010). Conversely, Latinx and Asian students may be more averse to taking out student loans, even when other sources of financial aid do not cover college costs (Goldrick-Rab & Kelchen, 2015). Some studies have shown that self-reported financial stress is higher among Students of Color, though this may be accounted for by the inadequacy of available financial resources (Archuleta, Dale, & Spann, 2013; Grable & Joo, 2006). Researchers have found that women report higher levels of financial stress than do men (Archuleta et al., 2013; Heckman, Lim, & Montalto, 2014) but that the amount of student debt associated with an increased risk of dropping out is lower for men than for women (Dwyer et al., 2013).

Financial concerns include both objective factors, reflecting the actual availability and use of resources, and subjective factors, reflecting students’ perceptions of their financial stability (Nora et al., 2006). We examined how both objective and subjective indicators of financial [End Page 115] concerns were associated with academic performance. First, we examined whether expected student loan debt and subjective levels of financial stress were associated with academic performance after 1 year, controlling for prior grades and demographics. Then, we examined interaction effects to determine whether the academic implications of financial concerns differed on the basis of race/ethnicity or gender.


Data Source

An online survey was distributed to a random sample of 5,000 undergraduate students enrolled at a large Midwestern public university in Fall 2014. Two reminders were sent, and participation was incentivized with entry into a gift card drawing. Of the 666 students who responded, data were analyzed for 299 respondents who were still enrolled 1 year later and who provided complete information about their finances and demographics. Of those excluded, 168 had graduated, 15 had dropped out or stopped out, and 184 had missing data on one or more key variables. We did not find statistically significant differences in the race/ethnicity, gender, student loan debt amount, financial stress, or grades of students with and without missing data.

The sample was demographically similar to the undergraduate population of the institution, although female students were overrepresented among survey participants. Most respondents (89.7%) were traditional-aged college students, and 60.5% were female. The sample was 72.4% White, 10.0% Asian, 7.6% Black, 1.3% Latinx, 7.3% multiracial/ethnic, and 1...


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pp. 115-120
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