Expanding the Theoretical Framework in Student Debt Research by Connecting Public Policy Theories to the Student Debt Literature

Current changes in the economic atmosphere have severely impacted the higher education sector worldwide. Policymakers worldwide are facing the challenge of adjusting tuition and financial aid programs in response to these changing economic times. The shift from federal grants to loans has caused student loans to be a popular means of funding higher education for most low and medium-income families. A result of this, is the increase in student loan default as most college students graduate with unmanageable debts, thus, a rising concern for policymakers. The purpose of this paper is to link four public policy theories (Social Contract Theory, Utilitarian Theory, Theory of Neoliberalism, and Three-Policy Stream Theory) to student loan literature. This is to expand the limited database of public policy theories in student loan debt literature. This theoretical linkage points out the role of policymakers in (1) ensuring the security of lives and the preservation of the property of those who voted them into power (Social Contract Theory); (2) establishing educational policies that ensure the ‘the greatest happiness of the greatest number’ (Utilitarian Theory); (3) upholding social welfare or a ‘welfare state’ through fiscal and monetary policies to ensure high employment rates for graduates, low inflation and the provision of public goods (Theory of Neoliberalism), and (4) the risk of undermining the growing power of an informal interest group that is made up of millennials saddled with student loan debt (Three-Policy Stream). These theories reiterate the principal role of policymakers in enhancing human capital through affordable education.

A Possibility or Just a Wish? Assessing Current Perceptions on the Potentials of a Full Student Loan Debt Forgiveness Legislation

Burdensome and unmanageable is what student loan repayment has become to almost 45 million Americans who owe a total of about $1.7 trillion in student loans. It is therefore intriguing to find out if a complete student loan debt forgiveness miracle is a possibility or just a wish, based on current perceptions. This study is based on the Three-Policy Window Stream Theory and the Interest Group Theory. Four mini-focus interview groups were created and their responses were analyzed using the Grounded-Theory Technique. From our findings, it is evident that student loan debt affects the mass, forming a rapidly growing informal interest group made up of mostly millennials. Yet, the pressure from this fast-growing informal interest group is not strong enough to oppose that of other interest groups like Republicans, taxpayers, financial institutions, and other stakeholders involved in student loans, to necessitate an immediate passage of legislation on student loans debt forgiveness.

Student Loans, Access to Credit and Consumer Financial Behavior

This paper provides novel evidence that increased student loan debts, caused by rising tuitions, increase borrowers' demand for additional consumer debt, while simultaneously restricting their ability to access it. The net effect of student loan debt on consumer borrowing varies by market, depending on whether the supply or demand channel dominates. In loosely underwritten credit markets, increased student loan debt causes borrowing to increase, while in tightly underwritten markets, increased student loan debt reduces the use of credit. These findings match predictions of a standard lifecycle model of household consumption and borrowing, augmented with a realistic student loan repayment contract.

Racial Capitalism and the Black Student Loan Debt Crisis

Background/Context Student loans reflect a larger shift in U.S. society in which people are forced to go into debt for basic needs. Student loan debt in the United States has been recognized as a political economic crisis that disproportionately devastates Black people. Scholars have statistically reported on racialized and gendered stratification in student loan outcomes and several name the racial wealth gap as the main contributing factor to the Black student debt crisis. Yet minimal attention has been dedicated to examining, let alone theorizing, the logics and systemic forces that racialize debt in higher education. Purpose Drawing on a theory of racial capitalism, this article fills analytic and theoretical gaps in the study of the Black student debt crisis by detailing how the crisis has been arranged as well as how it functions to constrain, dispossess, and exploit Black people. Research Design This article offers a corrective history, systematic analysis, and theoretical explanation of the Black student debt crisis. Findings/Results The paper draws on racial capitalism to account for how student loans as a policy has relied on anti-Black racial logics and systemic forces. The authors address how Black educational desires are co-opted, the government configures inclusion according to predatory terms, and the student loan industry forms a debt trap that exploits repayment struggles. While the majority of Black people who enroll in higher education never secure the promise of college as always “worth it,” the arrangement continues to be worthwhile for student loan profiteers. Student loans are perfect for racial capitalism because they answer demands for social access and inclusion (which are already reduced to mean credentialism) and reproduce both the disposability and dispossession of Black people's everyday lives. Conclusions/Recommendations The authors call for the full cancellation of student loan debt. This call forms part of a larger mobilization to abolish the racist logics, processes, and policies that make the Black student debt crisis and Black precarity possible in the first place.

Student loan debt and first-time home buying in USA

Purpose This paper aims to examine the relationship between student loan debt and first-time home buying among college graduates aged 23 to 40 years old in the USA. Design/methodology/approach The authors use the Federal Reserve’s 2019 Survey of Consumer Finances data on American households to present descriptive statistics and run logistic regressions that measure the effects of student loan debt on first-time home buying. The authors also present original survey data of mortgage lenders that provides an industry-level perspective. Findings The authors find that having student loan debt does not by itself prohibit first-time home buyers. On the contrary, having student loan debt increases the likelihood of homeownership by 15.1%. People with student loan debt, however, buy homes that are 39.2% less expensive and have 58% less home equity compared to first-time home buyers without student loans. In addition, it is found that the amount of student loan debt is important. People with student loan debt above the median amount among people with student loan debt ($35,000) are 27% less likely to be first-time home buyers. Practical implications This paper provides public policy analysts and other researchers a different perspective on the correlation between student loan debt and home buying. This study focuses narrowly on first-time home buyers who are college graduates between 23 and 40 years. Thus, capturing the youngest cohort of first-time home buyers and examine the primary factors that influence their home buying decisions. Originality/value First-time homebuyers are historically the largest segment of home buyers making them an important subcategory to study. The rise in student loan debt is posited to explain declining homeownership among younger people. The current literature on student loan debt and home buying often studies samples that are too heterogeneous resulting in mixed findings. This paper adds to the existing literature by filtering the sample to study the effects of student loan debt and first-time home buying among people with at least a college degree who are between 23 and 40 years.