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ollege costs are high and continue to grow as American students and their families are borrowing at unprecedented rates to keep pace with the increasing costs. The College Board (2012a), which produces an annual report tracking college costs, estimates the total annual cost of college attendance plus room and board at a private four-year college rose by 4.2 percent in 2012-13 to $29,056 (College Board, 2012a). Even the traditionally more affordable in-state, public four-year college costs were $8,655 for the 2012-13 school year, an increase of 4.8 percent from the prior school year. While these figures may reflect Postsecondary education costs in the United States today are rising with an increasing shift from societal responsibility to individual burden, thereby driving greater student borrowing. Evidence suggests that (i) such student debt may have undesirable educational effects and potentially jeopardize household balance sheets and (ii) student loans may better support educational attainment and economic mobility if accompanied by other, non-repayable financial awards. However, given declines in need-based aid and falling state support for postsecondary costs, policymakers and parents alike have failed to produce a compelling complement to debt-dependent financial aid that is capable of improving outcomes and forestalling assumption of ever-increasing student debt for a majority of U.S. households. This article, which relies on longitudinal data from the Educational Longitudinal Study, finds parental college savings may be an important protective factor in reducing debt assumption. However, several other factors increase the likelihood students will borrow: perceiving financial aid as necessary for college attendance, expecting to borrow to finance higher education, having moderate income, and attending a for-profit college. After controlling for student and school variables, the authors find that parental college savings increase a student's chance of accumulating lower debt (less than $2,000) compared with students lacking such savings. Policy innovations to increase parental college savingssuch as children's savings accounts-could be an important piece of the response to the student debt problem in the United States. (JEL I2, I22, I24)
Recent research has demonstrated that people believe they are more likely to climb the income ladder than they actually are. However, no one has explored the downstream psychological consequences of these unrealistically optimistic perceptions, particularly their impact on emotional well-being. Across four studies I explored the correlational and causal relationship between perceptions of one's own income mobility and emotional well-being. In Studies 1 and 2, I measure and assess the relationship between perceptions of income mobility and emotional well-being. I found that most participants see themselves as having high income mobility, and these perceptions of upward mobility are related to higher levels of happiness. In Study 3, I randomly assigned participants to read an article depicting income mobility as high, moderate, or low.Participants led to believe income mobility is high reported higher happiness relative to those led to believe income mobility is low. Lastly, in Study 4, utilizing a more diverse and generalizable sample from a National Panel Survey, I replicated the findings of Study 3. In sum, the present research demonstrates that people tend to be optimistic about their own chances of climbing the income ladder, and this sustained optimism translates into positive downstream emotional consequences.
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