Ten Years After the Great Recession: Are Young Adults Better Able to Navigate Student Loans?

Abstract

Previous research has extensively studied the relationship between basic financial knowledge and decision making. Within this framework, scholars have reached mixed conclusions on whether those with formal training are best suited to handle their finances. This article examines the association further by analyzing the behavior of those who reached adulthood after the Great Recession as it relates to student debt. Using a difference in means and multivariate analysis among a random sample of over 27,000 individuals, it appears that today’s young adults are more inclined to use loans to finance their education while also demonstrating more responsible behaviors associated with student debt. Controlling for age, financial knowledge and confidence are both linked to a lower likelihood of being in debt. These findings suggest that policymakers should address financial literacy as part of the solution to growing outstanding student debt amounts.