College Costs and Credit Cards: How Student Credit Card Use Influences College Degree Attainment

Abstract

Since the turn of the twenty-first century, going to college has become increasingly financially difficult in the United States. Tuition prices continued to rise, state funding for higher education declined, and the mean family income declined or stagnated for all but the top 20 percent of families (Goldrick-Rab 2016). In a period where college has risen to be the preeminent way Americans can make a better life for themselves, it is becoming more difficult for Americans to pay for college. Financial aid does not cover as much of the price of college as it once did (Goldrick-Rab 2016), and college students are relying on financing methods like student loans more than ever before. Student loans, however, are not the only credit-based financial strategy college students use to pay for college (Manning 2000, 2005). With the explosion of consumer credit access from the 1980s to the 2000s, college students are using credit cards, many times to bridge gaps in their budgets as they try to pay for college. This paper utilizes data from the Education Longitudinal Study (2002–12) to examine the link between college student credit card use and bachelor's degree attainment and demonstrates that college students who carry a balance on their credit card from month to month have a lower likelihood of completing a bachelor’s degree, net of other important factors. Research in the fields of financial counseling and planning, consumer studies, public policy, sociology, and health has explored college student credit card spending behaviors, associated health and educational outcomes, and the influence of family backgrounds on credit card use. This paper extends this existing body of research by considering how college student credit card use influences educational outcomes.

Appendix

Variable Descriptions

The ELS data have questions about college student credit card use that include:

• 1. “How many credit cards do you have in your own name that are billed to you? (If none, enter zero.)”

• • 0

• • 1

• • 2

• • 3

• • 4

• • 5

• • 6

• • 7 or more credit cards

*Note: The ELS top-codes this variable (7 or more credit cards) in the public use data. Respondents originally entered how many credit cards they have in their own name prior to the ELS condensing higher numbers into a single “7 or more” category. Refer to Variable #3 in this list to see how this variable was recoded in most of the analyses presented in this paper.

• 2. “Do you usually pay off your credit card balance each month, or carry the balance over from month to month?” This question was asked to any respondent in the second follow up (2006) who had at least one credit card.

• • Pay off balance

• • Carry balance

• 3. A recoded variable from the above measure expanding the variable to include a reference category that includes students who do not own a credit card.

• • No credit card

• • Credit card, does not carry balance

• • Carries balance on credit card

In order to measure students’ educational outcomes, I use these ELS variables:

• 1. Respondent’s highest level of education as of the third follow up (2012)

• • Some PS attendance, no PS credential

• • Undergraduate certificate

• • Associate’s degree

• • Bachelor’s degree

• • Post-Baccalaureate certificate

• • Master's degree/Post-Master's certificate

• • Doctoral degree

• 2. A recoded variable from the above measure simplifying degree attainment to whether or not the respondent attained a bachelor’s degree:

• • No bachelor’s degree by 2012

• • Bachelor’s degree by 2012

Important control variables from the ELS data include:

• 1. Socioeconomic status

• • Lower

• • Middle

• • Upper

• 2. Race

• • White

• • Asian

• • Black

• • Hispanic

• • Other

• 3. Gender

• • Male

• • Female

• 4. Hours worked weekly 2005–06

• • Did not work

• • 1–20 h

• • More than 20 h

• 5. Institution type

• • Respondent first attended a less than 4-year postsecondary institution

• • Respondent first attended a 4-year postsecondary institution

• 6. Total student loans in 2012

• • No student loans

• • $1-$10,000

• • Greater than $10,000

• 7. Total Pell Grants in 2012

• • No Pell Grants

• • $1-$10,000

• • Greater than $10,000

• 8. Respondent has biological child or is currently or has been previously married in 2006

• • No

• • Yes

• 9. High school GPA

• • 3.00 or lower

• • 3.01–4.00

• 10. High school composite math/reading score (20.91–81.04)