In this study, the authors use the 2013 Survey of Consumer Finances (SCF) to determine whether outstanding student loan debt is associated with financial asset and non-financial asset.

1. THE EFFECT OF OUTSTANDING STUDENT LOAN
DEBT ON ASSET ACCUMULATION
BY: FRIEDI SCHESTAG, OLGA PETROVSKA & KADAR AMEK
SFSU, December 13, 2016

2. ORGANIZATION OF PRESENTATION
◼Quick facts about student debt and assets.
◼Literature review.
◼Research question and concentration of our research.
◼Data source and description of variables.
◼Model and estimation steps.
◼Results.
◼Conclusion.
◼Further research.

3. QUICK FACTS ABOUT STUDENT DEBT
Is student debt an issue?
In 2012:
◼ 71% of all students graduating from four-year colleges had student loan debt.
◼ This is 1.3 million students graduating with debt in comparison with 1.1 million in 2008 and 0.9 million in 2004.
◼ 66% of graduates from public colleges had student loans, 75% of graduates from private nonprofit colleges had
student debt and 88% of graduates from private for-profit colleges had student debt.
◼ Average debt levels for all graduating seniors with student debt increased to $29,400 which is 25% higher than in
2008.
In 2015:
◼ Nationwide, about 7 in10 college seniors who graduated from public or private nonprofit colleges had student debt.
◼ Average debt amount was $30,100 which is 4% increase from the 2014 average of $28,950.
Student debt is constantly increasing, more people is borrowing money to pay for the college.
Student debt is an issue.
Source: The Institute For College Access & Success.

4. MOTIVATION TO STUDY ASSETS
◼ After college we generate income, use that income to built up assets.
◼ Why? In order to generate more income.
◼ Why do we want to purchase assets?
◼ Household assets is an important defining factor of economic well-being in the U.S.
◼ Especially for low - moderate income families: Because in economic hardships, such as
unemployment, illness,etc. household assets can be seen as an additional source of income as
well as something to fall back on.
◼ Household Goals: Building up assets and avoiding excessive debt
◼ In long term: For older households (65), assets are a source of post retirement income.

5. LITERATURE REVIEW
Elliott and Nam (2013) – the effects of student loans on net worth:
◼ median 2009 net worth for households with no outstanding student loan debt is about three times higher than for
households with outstanding student loan debt.
Hiltonsmith (2013) – student debt and lifetime wealth:
◼ average student debt burden for a dual-headed household with bachelors’ degrees leads to a lifetime wealth loss of
nearly $208,000.
Elliot and Lewis (2013) – the effects of student debt on assets:
◼ median assets in 2009 for a household without outstanding student debt ($207,000) are higher than for a household
with outstanding student debt ($174,000).
◼ living in a household with median assets in 2007 which has outstanding student debt is associated with a loss of
about 20% in assets compared to a household with similar levels of assets but without student debt.
Elliott, Grinstein-Weiss, Nam (2013) – the effects of outstanding student debt on assets accumulation:
◼ median assets in 2009 for a household without outstanding student debt are higher than for a household with
outstanding student debt.
◼ living in a household at the 50th percentile with outstanding student debt and 2007 assets of $225,035 is associated
with a loss of about 20% in 2009 assets (about $44,661) in comparison with a similar household with no student debt.

6. RESEARCH QUESTIONS
◼ Is having outstanding student loan debt associated with assets accumulation?
◼ Is the amount of outstanding student loan debt associated with assets?
◼ Which type of assets gets more affected by outstanding student loan?
◼ Lastly, evaluating the marginal effects of the coefficients at the 25th, 50th, and
75th percentiles.

7. DEPENDENT VARIABLES
Financial Asset (fin) Nonfinancial Asset (nfin)
Liquid
Assets
CDs
Savings
Bonds
Bonds
Publicly
Traded
Stocks
Non-money
Market
Mutual
Funds
Retirement
Account
Cash Value
Life
Insurance
Other
Managed
Assets
Other
Financial
Assets
Vehicles Houses
Other
Residential
Real Estate
Net equity in
Nonresidentia
l Real Estate
Net Equity in
Privately Held
Businesses

8. DESCRIPTION OF BASE VARIABLES
Name Type Description
Stdebt Dummy =1 if R. has outstanding student
debt
stdebt Quantitative Amount of student debt
income Quantitative Amount of income in 2012
welfare Quantitative Amount received from welfare
married Dummy =1 if Married or living with spouse
race 4 Dummies White, Black, Hispanic,
Asian/Other
OCCAT2 4 Dummies Occupational prestige
age Integer Age of Respondent in years
colldeg Dummy =1 if R. has college degree

9. SURVEY OF CONSUMER FINANCES
◼ Sponsored by the Federal Reserve Board.
◼ The 2013 Survey of Consumer Finances most recent survey conducted.
◼ Every 3 years.
◼ Information on finances of U.S. households.
◼ Data: Summary Extract Data (multiple imputation to correct for missing data).

10. SAMPLE CHARACTERISTICS

11. DATA SUMMARY STATISTICS

12. ESTIMATION STEPS
◼ Computing missing values for dependent variables: “mi impute reg” command in Stata.
◼ Estimating effects of outstanding student loan debt on each type of assets using dummy for student
debt variable, OLS using ”mi estimate” command in Stata.
◼ Estimating effects of outstanding student loan debt on each type of assets using dummy for student
debt variable and age restriction (<=45/35). OLS using ”mi estimate” command in Stata.
◼ Estimating effects of outstanding student loan debt on each type of assets with age restriction
(<=45/35). OLS using ”mi estimate” command in Stata.
◼ Estimating effects of outstanding student loan debt on each type of assets using student debt variable
and age restriction (<=45/35). Quantile regression using ”mi estimate” command in Stata, dividing the
asset distribution in 4 quartiles

13. MODELS

14. REGRESSION OUTPUT (FINANCIAL & NONFINANCIAL ASSET)
◼ Is there an effect between financial & nonfinancial asset and student debt? (using dummy for student debt variable)

15. REGRESSION OUTPUT WITH AGE RESTRICTION
<=45 – FIN ASSETS & <=35 – NONFIN ASSET
◼ Is there an effect between financial & nonfinancial asset and student debt? (using dummy for student debt
variable)

16. REGRESSION OUTPUT (FINANCIAL & NONFINANCIAL ASSET)
◼ Is there an effect between financial & nonfinancial asset and student debt?

17. OLS RESULTS SUMMARY
Nonfinancial AssetsFinancial Assets
▪ Yes, there is a relationship between
having outstanding student debt and
financial assets.
▪ Yes, there is a relationship between
having outstanding student debt and
financial assets, with age restriction
of <=45.
▪ Yes, there is an effect. On average, a
1% increase in outstanding student
debt is predicted to decrease
financial assets by $104,031.04
holding everything else fixed.
▪ Yes, there is a relationship between
having outstanding student debt and
nonfinancial assets.
▪ Yes, there is a relationship between
having outstanding student debt and
nonfinancial assets, with age
restriction of <=35.
▪ Yes, there is an effect. On average, a
1% increase in outstanding student
debt is predicted to decrease
nonfinancial assets by $129,394.56
holding everything else fixed.

18. QUANTILE REGRESSION
Why are we using a quantile
regression?
Comprehensive Picture Linear Regression -Partial
View-
Outlier Problem Are the coefficient changing?

19. QUANTILE REGRESSION: OUTPUT, 0.25 QUANTILE
◼ Is there an effect between financial & nonfinancial asset and student debt?

20. QUANTILE REGRESSION: OUTPUT, 0.5 QUANTILE
◼ Is there an effect between financial & nonfinancial asset and
student debt?

21. QUANTILE REGRESSION: OUTPUT, 0.75 QUANTILE
◼ Is there an effect between financial & nonfinancial asset and student debt?

22. QUANTILE REGRESSION SUMMARY
Financial Assets Nonfinancial Assets
Linear
Regression
Coefficient
-0.027
Q .25
Coefficient
-0.023
Q.50
Coefficient
-0.029
Q.75
Coefficient
-0.020
Linear
Regression
Coefficient
-0.04
Q .25
Coefficient
-0.03
Q.50
LR=QR
-0.04=-0.04
Q.75
Coefficient
-0.033

23. CONCLUSION
◼ Linear Regression: Overall, a four-year college graduate with outstanding student debt will be in bad
financial health ( in terms of assets) than a four-year college graduate with no outstanding student debt,
in short run.
◼ Linear Regression: Just by having student debt: Financial Assets predicted to go down by 54% and
Nonfinancial Assets - down by 43%.
◼ Linear Regression: The effect of student debt on nonfinancial assets ($129,394.56) is higher than for
financial assets ($104, 031.04).
◼ Quantile Regression: For both components of the asset the effect is approximately the same and do
not drastically differ from linear regression coefficient.
◼ It delays major life events for young professionals (House, Financial stability, Post-retirement life).

24. FURTHER RESEARCH
◼Use SCF 2016 and compare with previous research to determine trends.
◼Analyze and compare the same relationship by:
Region;
States (Each state have different average student debt);
Type of school (Public and Private University).

25. THE END
THANK YOU!