According to the life-cycle hypothesis, we have different propensities to consume in relation to saving depending on age
Age. A younger person in the production stage may be able to afford the expense to fund an education savings account for his or her child(ren), as opposed to someone in the retirement stage.
Net worth. Based on the status attainment theory, net worth of a parent is positively correlated to the child’s educational achievement. The variable net worth is log transformed in order to reduce skewedness and for interpretation purposes. Furthermore, the net worth variable is from the year 2008 in order to assess how past net worth affected having a college savings account in the future.
Income. The status attainment theory also indicates a positive relationship between parent’s income and child’s educational attainment. The variable income is log transformed in order to reduce skewedness.
High financial literacy. People who are financially literate make smarter payday loans in Falmouth KY decisions with their money. They are more aware of financial products and understand the importance of financial planning. The high financial literacy variable is composed of three true or false questions. Respondents who answered the three questions correctly were labeled as having high financial literacy, otherwise they were not. Therefore, this variable is dichotomous. However, in the t-test, it is made continuous and is called financial literacy index, with values ranging from 0 to 3.
Descriptive Results
Table 4 shows the summary statistics. The mean, median, and standard deviation amount of parent’s student debt are $23,, $11,000, and $34,, respectively. The mean, median, and standard deviation of net income are $75,695, $55,000, and $82,, respectively. The net worth’s mean, median, and standard deviation are $259,, $68,900, and $580,, respectively.
Table 5 shows the results from a t-test from those respondents who have student debt and from those that do not have student debt. The difference of the mean of age of the respondents who have student debt () is statistically different from the mean of age of those who do not have student debt ().
The mean net worth of the respondents with student debt was $133,605, while the mean net worth of the respondents with no student debt was $272,828. Since it is statistically different, it means that in this sample the respondents that reported no student debt had percent more net worth than those who reported having student debt. The difference of net income of these two groups is not statistically significant.
From a scale of 0 to 3, the mean financial literacy score for the respondents with student debt was 2.39 while the mean financial literacy score for the respondents with no student debt was 2.25; this difference proves to be statistically different, meaning that respondents reporting having student debt scored higher on the three financial literacy questions.
Table 6 shows the results of a chi-square test. It shows that percent of the sample was married, and from these, percent did not have student debt, and 7.17 percent had student debt. There is an association between being married and having student debt.
Lastly, the mean, median, and standard deviation of amount owed on student loans for children are $20,, $10,000, and $29,, respectively
Males comprised percent of the sample. Of that, 93.3 percent did not have student debt, and 6.7 percent had student debt. This research found an association between being a male and having student debt.
Blacks made up percent of the sample; percent of them did not have student debt and percent did. This research found an association between blacks and having student debt. Hispanics made up percent of this sample; percent of them did not have student debt, and 7.32 percent did. Nevertheless, there is no association between Hispanics and student debt.
