Parental Borrowing for Dependent Children’s Higher Education

Abstract

Using the 1992-1993 Baccalaureate and Beyond Longitudinal Study, with the 1997 follow-up, the parental decision to borrow and, for borrowers, the level of borrowing for dependent children's college education was analyzed. Parents with smaller household size and those being college graduates borrowed greater amounts. White parents borrowed greater amounts than their non-White counterparts. The age of the student, dependent students' income and parents' cash and savings each had a significant negative impact on the amount parents borrowed, while home equity was a significant positive factor. Greater college costs significantly increased parents' decision to borrow, as well as the borrowed amount. Greater amounts of grants significantly reduced the amount borrowed.

Young, Black, and (Still) in the Red: Parental Wealth, Race, and Student Loan Debt

“…Families can draw from their income streams, private assets, and can rely on tax credits (i.e., 529 savings accounts) to assist with paying for the costs of attendance. Indeed, a large body of the literature shows that family’s socioeconomic resources are positively associated with college contributions (Cha et al 2005; Charles et al 2007; Choy and Berker 2003; Hossler and Vesper 1993; Mauldin et al 2001; Steelman and Powell 1991). Given these relationships, surprisingly little is known about how family resources contribute to the student loan debt experience and whether these associations differ by race.…”

“…Moreover, once in college, parents can use their financial resources and knowledge to help their children navigate their postsecondary institution (Goldrick-Rab and Pfeffer 2009) providing young adults from higher socioeconomic families with advantages across their college career. Thus, it is perhaps not surprising that parents with greater financial and knowledge resources are able to contribute more money to their children’s college expenses (Choy and Berker 2003; Charles et al 2007; Grodsky and Jones 2007; Hossler and Vesper 1993; Schoeni and Ross 2005; Steelman and Powell 1991; Swartz 2008), and are also more likely to take on debt in lieu of their children (Cha et al 2005). …”

Saving for Children’s College Education: An Empirical Analysis of the Trade-off Between the Quality and Quantity of Children

“…This paper uses the amount of parental financial support for children's college expenses as a measure of child quality. An analysis of financing children's college expenses highlights an important aspect of the quality-quantity model of fertility, since most parents consider the funding of their children's college education as one of their most important family financial goals (Cha et al 2005). Also, higher education is costly for families.…”

Assets and liabilities, educational expectations, and children's college degree attainment

“…Nonfinancial assets (such as home and business ownership) are likely to facilitate borrowing by providing collateral to lenders (Nam & Huang, 2008). Supporting this hypothesis, a study by Cha, Weagley, and Reynolds (2005) indicates that parents with a higher value of home equity borrowed larger amounts of money for their children's higher education. Cha and colleagues also find that parental cash and savings have negative effects on borrowing, probably because as cash and savings increase, parents have less need to borrow for college expenses.…”