1. Capable and Smart Decisions about Student Loans
2017 ISU Symposium on Undergraduate Research and Creative Expression
Human Development and Family Studies
Capable and Smart Decisions about Student Loans
Amberly J. Ehret & Clinton G. Gudmunson

2. Introduction
Between 2000 and 2014, the total volume of outstanding federal student debt nearly quadrupled to surpass $1.1 trillion
The number of student loan borrowers more than doubled to 42 million
Default rates among recent student loan borrowers rose to their highest levels in 20 years (Looney & Yannels, 2015)

3. Purpose
Determine how financial capability and student loan decision making strategies impact financial efficacy and loan stress
Identify ways to help students, parents, and practitioners counsel students better to increase their financial efficacy and reduce their stress related to student loans

4. Review of Literature
Self-efficacy is ”an individual’s convictions (or confidence) about his or her abilities to mobilize the motivation, cognitive resources, and courses of action needed to successfully execute a specific task within a given context” (Mesurado, Richaud, & Mateo, 2016).
Financial stress and loan stress leads to an increased likelihood of discontinuing college (Britt, Ammerman, Barrett, & Jones, 2017).
Eustress is considered to be a “positive response to a stressor” whereas distress is a “negative response to a stressor” (O’Sullivan, 2011).
People who experience a certain level of stress (good stress or eustress) are more productive in that particular moment and can produce more effectively than if stress is completely eliminated (Mesurado, Richaud, & Mateo, 2016).

5. Methodology
Using data from the National Student Financial Wellness Study from 50 universities in the United States, this study examines the impact of student loan decision making strategies and financial capability on financial efficacy and student loan stress using a hierarchical linear regression model
Our sample is 5,892 students ages 18-24, who borrowed student- loans in survey year 2014

6. Independent Measures Student Loan Decision Making Strategies—
Stem: When deciding how much money I will need to borrow for the school year, I:
Borrow the maximum amount available in my aid package, regardless of the amount
Use my budget and borrow only what I think I will need
Try to borrow as little as possible
Consider the total amount of debt I will graduate with
Consider the amounts I have borrowed in the past
Financial capability includes:
financial knowledge, financial behavior, and financial stress.

7. Key Findings: Financial Efficacy
Table 1 Regression models predicting financial efficacy and student loan stress (N=5,892)
Financial Efficacy
Loan Stress
Variables
Model 1
Model 2 b
(SE) β
Student Loan Strategies
Budgeted borrowings
.032
(.026)
.019
.051
(.025)
.030*
.197
(.035)
.082***
.083
(.029)
.035**
Considered past loan amounts
-.008
(.027)
-.005
.003
.001
.148
(.037)
.060***
.094
(.030)
.038**
Considered future debt load
-.004
-.002
.005
.039*
.041
.017
Borrowed least possible
.054
.032*
-.028
(.036)
-.012
-.055
-.023†
Borrowed maximum
(.033)
-.028*
.015
(.032)
.007
.329
(.045)
.119***
.123
.044**
Financial Capability
Financial Knowledge Score
.045
(.008)
.073***
(.009)
Financial Behavior
.084
(.019)
.058***
.114
(.021)
.056***
Financial Stress
-.298
(.015)
-.266***
.925
(.017)
.589***
Constant
2.772
(.048)
3.373
(.085)
3.507
(.065)
.291
(.098)
Model Summary F
6.545***
34.449***
29.343***
*** R2
.092
.065
.394
Model controls for gender (female=reference, male, transgender, and self-identified), class rank (freshmen=reference, sophomore, junior, senior, 5+ year), and parent education (mother and father). † p < .10 * p < .05, ** p < .01, *** p < .001

8. Key Findings: Financial Efficacy
Table 1 Regression models predicting financial efficacy and student loan stress (N=5,892)
Financial Efficacy
Loan Stress
Variables
Model 1
Model 2 b
(SE) β
Student Loan Strategies
Budgeted borrowings
.032
(.026)
.019
.051
(.025)
.030*
.197
(.035)
.082***
.083
(.029)
.035**
Considered past loan amounts
-.008
(.027)
-.005
.003
.001
.148
(.037)
.060***
.094
(.030)
.038**
Considered future debt load
-.004
-.002
.005
.039*
.041
.017
Borrowed least possible
.054
.032*
-.028
(.036)
-.012
-.055
-.023†
Borrowed maximum
(.033)
-.028*
.015
(.032)
.007
.329
(.045)
.119***
.123
.044**
Financial Capability
Financial Knowledge Score
.045
(.008)
.073***
(.009)
Financial Behavior
.084
(.019)
.058***
.114
(.021)
.056***
Financial Stress
-.298
(.015)
-.266***
.925
(.017)
.589***
Constant
2.772
(.048)
3.373
(.085)
3.507
(.065)
.291
(.098)
Model Summary F
6.545***
34.449***
29.343***
*** R2
.092
.065
.394
Model controls for gender (female=reference, male, transgender, and self-identified), class rank (freshmen=reference, sophomore, junior, senior, 5+ year), and parent education (mother and father). † p < .10 * p < .05, ** p < .01, *** p < .001

9. Key Findings: Loan Stress
Table 1 Regression models predicting financial efficacy and student loan stress (N=5,892)
Financial Efficacy
Loan Stress
Variables
Model 1
Model 2 b
(SE) β
Student Loan Strategies
Budgeted borrowings
.032
(.026)
.019
.051
(.025)
.030*
.197
(.035)
.082***
.083
(.029)
.035**
Considered past loan amounts
-.008
(.027)
-.005
.003
.001
.148
(.037)
.060***
.094
(.030)
.038**
Considered future debt load
-.004
-.002
.005
.039*
.041
.017
Borrowed least possible
.054
.032*
-.028
(.036)
-.012
-.055
-.023†
Borrowed maximum
(.033)
-.028*
.015
(.032)
.007
.329
(.045)
.119***
.123
.044**
Financial Capability
Financial Knowledge Score
.045
(.008)
.073***
(.009)
Financial Behavior
.084
(.019)
.058***
.114
(.021)
.056***
Financial Stress
-.298
(.015)
-.266***
.925
(.017)
.589***
Constant
2.772
(.048)
3.373
(.085)
3.507
(.065)
.291
(.098)
Model Summary F
6.545***
34.449***
29.343***
*** R2
.092
.065
.394
Model controls for gender (female=reference, male, transgender, and self-identified), class rank (freshmen=reference, sophomore, junior, senior, 5+ year), and parent education (mother and father). † p < .10 * p < .05, ** p < .01, *** p < .001

10. Key Findings: Loan Stress
Table 1 Regression models predicting financial efficacy and student loan stress (N=5,892)
Financial Efficacy
Loan Stress
Variables
Model 1
Model 2 b
(SE) β
Student Loan Strategies
Budgeted borrowings
.032
(.026)
.019
.051
(.025)
.030*
.197
(.035)
.082***
.083
(.029)
.035**
Considered past loan amounts
-.008
(.027)
-.005
.003
.001
.148
(.037)
.060***
.094
(.030)
.038**
Considered future debt load
-.004
-.002
.005
.039*
.041
.017
Borrowed least possible
.054
.032*
-.028
(.036)
-.012
-.055
-.023†
Borrowed maximum
(.033)
-.028*
.015
(.032)
.007
.329
(.045)
.119***
.123
.044**
Financial Capability
Financial Knowledge Score
.045
(.008)
.073***
(.009)
Financial Behavior
.084
(.019)
.058***
.114
(.021)
.056***
Financial Stress
-.298
(.015)
-.266***
.925
(.017)
.589***
Constant
2.772
(.048)
3.373
(.085)
3.507
(.065)
.291
(.098)
Model Summary F
6.545***
34.449***
29.343***
*** R2
.092
.065
.394
Model controls for gender (female=reference, male, transgender, and self-identified), class rank (freshmen=reference, sophomore, junior, senior, 5+ year), and parent education (mother and father). † p < .10 * p < .05, ** p < .01, *** p < .001

11. Discussion
Financial capability is more important than student loan decision making strategies related to financial efficacy and stress related to student loans
Borrowing the maximum is a risky or adverse strategy
All other strategies are positive strategies: “an active plan is better than no plan at all (defaulting to borrowing the maximum)”
Stress due to budgeting and considering past loan amounts can be positive due to making students aware of their financial situation and knowledgeable about how much they need to borrow to pay for university expenses

12. Implications: Why is this study so important for students, parents, and financial counselors?
Focus on making students more financially capable by encouraging positive financial behaviors, teaching financial knowledge skills, and helping to alleviate negative financial stress
Then focus on utilizing positive student loan decision making strategies when considering borrowing a student loan (budget, least, past, and future)
Create early intervention programs for students who have low financial knowledge, negative financial behaviors, or high financial stress

13. Questions, Comments, Concerns

14. Limitations and Future Research
Cross-sectional survey
Response rate of 11%
Future Research
We need to know more about loan stress and financial efficacy impacts
Defaults
Good choice of repayment plans
Exit-counseling strategies
Outcomes related to academics: GPA, graduating on time, majors, etc.

15. Acknowledgements
The National Student Financial Wellness Study (NSFWS) was developed and administered by The Ohio State University in collaboration with co-investigators from Cuyahoga Community College, DePaul University, Iowa State University, Oberlin College, Ohio University, and Santa Fe College. More information on the study is available at go.osu.edu/nsfws.
Dr. Clinton G. Gudmunson
Dr. Suzanne Bartholomae
Dr. Jonathan J. Fox
Iowa State University: Human Development and Family Studies Department

16. References
Britt, S. L., Ammerman, D. A., Barrett, S. F., & Jones, S. (2017). Student Loans, Financial Stress, and College Student Retention. Journal of Student Financial Aid,47(1),
Looney, A., & Yannelis, C. (2015). A Crisis in Student Loans?: How Changes in the Characteristics of Borrowers and in the Institutions They Attended Contributed to Rising Loan Defaults. Brookings Papers on Economic Activity,2015(2), 1-68.
Mesurado, B., Richaud, M. C., & Mateo, N. J. (2016). Engagement, Flow, Self-Efficacy, and Eustress of University Students: A Cross-National Comparison Between the Philippines and Argentina. The Journal of Psychology,150(3),
O’Sullivan, G. (2011). The Relationship Between Hope, Eustress, Self-Efficacy, and Life Satisfaction Among Undergraduates. Social Indicators Research,101(1),