Financial Capability of Student Loan Holders: Comparing College Graduates, Dropouts, and Enrollees

Abstract

Effective consumer financial education provides relevant information to meet special needs of targeted audiences. The purpose of this study is to compare financial capability among three types of student loan holders, who completed, did not complete, and are enrolled in a higher education program. Four indicators of financial capability are used: objective financial literacy, subjective financial literacy, desirable financial behavior, and perceived financial capability. In addition, an index of financial capability is constructed based on the four indicators. Using data from the 2015 U.S. National Financial Capability Study, the results show that student loan holders who completed their education program had higher scores in all four indicators and the index of financial capability than college dropouts and enrollees. Further analyses show that differences in specific financial knowledge points are found among college graduates, dropouts, and enrollees. In addition, college graduates are more likely to perform several specific desirable financial behaviors than college dropouts and enrollees, and college dropouts and enrollees differ in two specific financial behaviors. The research findings have implications for consumer policy and education as they demonstrate the necessity of providing tailored financial education programs for different types of student loan holders in order to meet their individual needs.