Ability to Finish College Affected by Family Debt, New Study Suggests

5/22/2014 | Sharita Forrest, News Editor, Illinois News Bureau

CHAMPAIGN, Ill. — Family debt diminishes students’ prospects of graduating from college, and is particularly detrimental to black students’ chances of earning degrees, suggests a new study by social work professor Min Zhan and doctoral student Deirdre Lanesskog, both at the University of Illinois.

Family assets and debt during college enrollment are similar to factors such as academic readiness and parental education in that they are correlated to young adults’ chances of graduating and are critical to reducing racial/ethnic disparities in graduation rates, the study indicated.

The researchers examined the college graduation statuses of 915 young adults who enrolled in college between 2000 and 2004. The authors explored links between students’ graduation rates and families’ household assets and debt at two time points: the years that the students enrolled and when they graduated.

Data for the study were drawn from the National Longitudinal Survey of Youth, which began in 1979, and a related survey called the Young Adult sample. Participants in the Young Adult sample, who were the children of women who participated in the NLSY, were interviewed biennially beginning in 1994.

Most prior studies that examined associations between familial assets and children’s education focused on the early childhood or adolescent years and paid very little attention to the impact of debt.

“Examining parental assets and debt around the time of college enrollment is important because that is when youth and their families are evaluating college options and how to pay for them,” Zhan said.

Unlike many prior studies, the sample for the current study also included Hispanic young people. Along with 199 Hispanics, the final study sample comprised 399 white students and 317 black students.

Most of the young people (96 percent) enrolled in public universities and about half (49 percent) obtained student loans. When the authors examined graduation data in 2010, just 39 percent of the young people in the sample had earned bachelor’s degrees.

White students were about twice as likely as blacks or Hispanics – 47 percent vs. 25 percent and 23 percent, respectively – to report holding a bachelor’s degree, the authors found.

When the authors controlled for student and family income and mother’s education, the racial gaps in graduation rates were slightly reduced; however, white students were still about twice as likely to graduate as their black or Hispanic peers.

A small portion of the racial/ethnic gaps in college graduation rates may be explained by differences in the types of household assets and debt that black, Hispanic and white families have, Zhan suggested.

“Family assets are positively related to college graduation for both black and white students, but family debt has a negative impact on black students’ chances of graduating,” Zhan said. “The magnitude of the association indicates that family debt hurts black students’ chances of graduating much more than it hurts white students’ chances of graduating. The overall debt-to-assets ratio was much higher – nearly 50 percent higher – among black families than white families, which may explain why debt had a stronger negative impact on black students.”

However, family assets and debt had no measured impact on the graduation rates of Hispanic young people. Zhan hypothesized that other family characteristics that were not examined in the research, such as immigration status, language skills or college selection, might be more salient for Hispanic students.

While family income was related to college graduation rates – students who came from higher-income families were more likely to earn degrees – the association between income and graduation rates lost statistical significance when family assets and debt were included in the analysis.

This result suggested that family assets and debt might be more significant than family income in influencing youth’s college success, and underscores the importance of building parental assets and reducing debt to ensure college success, Zhan said.

The paper, “The Impact of Family Assets and Debt on College Graduation,” is available online in advance of publication in the journal Children and Youth Services Review.