Theoretical Framework in Student Debt Research: Linking Economic, Finance and Education Theories to Student Debt Literature

Authors

  • Ruth Endam Mbah

DOI:

https://doi.org/10.14738/assrj.92.11761

Keywords:

Student Loan Debt, Financial Aid, Higher Education, Federal Student Loans, Student Debt Theories, Debt Repayment Models, Human Capital Theory, Life Cycle Model, The Debt Snowball Theory, The Balance-Matching Model, Debt Avalanche Model, Debt Consolidation Model, Tinto Student Departure Model, John Bean’s Explanatory Theory of Student Retention

Abstract

There has been a growing interest in student debt research in recent years among researchers and graduate students. Student loan has become a popular means of financing the increasing cost of higher education among millennia, thus spurring the rising interest of researchers in this area. However, the availability of established theories related to the student debt topic is limited. The purpose of this study is to add to the limited literature of theories in student debt scholarship. This study links two economic theories, four finance theories, and two education theories to student debt literature. The economic theories (human capital theory and life cycle Model) emphasize the role of student loans in fostering investment in human capital and its impact on future consumption. This study also examines four debt repayment models (the debt snowball model, the balance-matching model, the debt avalanche model, and the debt consolidation model) suggested by various financial advisors on debt repayments, which postulate four distinct strategies on how debtors can settle their loans. The education theories (Tinto student departure model and John Bean’s explanatory theory of student retention model) highlight the importance of student retention at colleges to ensure college completion, which in turn increases the chances of getting a job; thus, guaranteeing loan repayment. These theories will serve as a theoretical framework guide to researchers, especially graduate students who are working on their thesis or dissertation on the student loan debt topic.

References

Adams, K. (2018). College loans: Private vs. federal. Retrieved February 6, 2019, from https://www.investopedia.com/articles/younginvestors/09/private-or-federal-student-loans.asp

Aljohani, O. (2016). A comprehensive review of the major studies and theoretical Models of student retention in higher education. Higher Education Studies, 6(2). https://doi.org/10.5539/hes.v6n2p1

Amar, M., Ariely, D., Ayal, S., Cryder, C., & Rick, S. (2011, May 5). Winning the battle but losing the war: The psychology of debt management. Retrieved from https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1760528

Ashar, H., & Skenes, R. (1993). Can Tinto’s Student Departure Model be applied to nontraditional students? Adult Education Quarterly, 43(2), 90–100. Retrieved from https://journals-sagepub-com.libezp.lib.lsu.edu/doi/pdf/10.1177/0741713693043002003

Atif, A., Bilgin, A., & Richards, D. (2013). A student retention model: Empirical, theoretical, and pragmatic considerations. In 24th Australasian Conference on Information Systems (pp. 4–6).

Bean, J. P. (1981). The synthesis of a theoretical model of student attrition. Los Angeles: ERIC

Becker, G. S. (Gary S. (1993). Human capital: A theoretical and empirical analysis, with special reference to education. The University of Chicago Press.

Berger, R. (2017). Debt snowball versus debt avalanche: What the academic research shows. Retrieved February 10, 2019, from https://www.forbes.com/sites/robertberger/2017/07/20/debt-snowball-versus-debt-avalanche-what-the-academic-research-shows/#b4e628e1454a

Birken, E. (2016). Federal student loans vs. private student loans: What’s the difference? Retrieved February 6, 2019, from https://studentloanhero.com/blog/federal-private-student-loans-difference/

Boyer, R. (2012). The ‘snowball approach’ to debt - Kellogg School of Management. Retrieved February 10, 2019, from https://www.kellogg.northwestern.edu/news_articles/2012/snowball-approach.aspx

Britt, S., Ammerman, D., Barrett, S., & Jones, S. (2017). Student loans, financial stress, and college student retention recommended citation. Journal of Student Financial Aid, 47. Retrieved from http://publications.nasfaa.org/jsfa

Buam, S., & O’Malley, M. (2003). College on credit: how borrowers perceive their education debt. Journal of Student Financial Aid, 33. Retrieved from http://publications.nasfaa.org/jsfa

Burgess, S. (2016). Human capital and education: The state of the art in the economics of education. Retrieved from http://www.coeure.eu/.

Čadil, J., Petkovová, L., & Blatná, D. (2014). Human capital, economic structure, and growth. Procedia Economics and Finance, 12, 85–92. https://doi.org/10.1016/S2212-5671(14)00323-2

Chartered Institute of Personnel and Development. (2017). Human capital theory: Assessing the evidence for the value and importance of people to organizational success. Retrieved from https://www.cipd.co.uk/Images/human-capital-theory-assessing-the-evidence_tcm18-22292.pdf

Congressional Budget Office. (2010). Costs and policy options for federal student loan programs. Congress of the United States.

Diebolt, C., & Hippe, R. (2019). The long-run impact of human capital on innovation and economic development in the regions of Europe. Applied Economics, 51(5), 542–563. https://doi.org/10.1080/00036846.2018.1495820

Elliott, W., & Nam, I. S. (2013). Is student debt jeopardizing the short-term financial health of U.S. households? Federal Reserve Bank of St. Louis Review.

Elliott, W., & Lewis, M. (2015). Student debt effects on financial well-being: Research and policy implications. Journal of Economic Surveys, 29(4), 614–636. https://doi.org/10.1111/joes.12124

Elmblad, S. (2018). What is the debt snowball method? Retrieved February 10, 2019, from https://www.thebalance.com/what-is-debt-snowball-1293674

Executive Office of the President. (2016). Investing in higher education: benefits, challenges, and the state of student debt. (Penny Hill Press, Ed.). CreateSpace Independent Publishing Platform. Retrieved from https://obamawhitehouse.archives.gov/sites/default/files/page/files/20160718_cea_student_debt.pdf

Fontinelle, A. (2018). Pros and cons of balance transfers. Retrieved February 11, 2019, from https://www.investopedia.com/articles/personal-finance/111214/pros-and-cons-balance-transfers.asp

Fos, V., Liberman, A., & Yannelis, C. (2017). Debt and Human Capital: Evidence from Student Loans. Retrieved from https://www.newyorkfed.org/microeconomics/hhdc.html,

Galor, O., & Moav, O. (2004). From physical to human capital accumulation: Inequality and the process of development. review of economic studies (Vol. 71). Retrieved from http://piketty.pse.ens.fr/files/GalorMoavRES2004.pdf

Gathergood, J., Mahoney, N., Stewart, N., & Weber, J. (2017). How do individuals repay their debt? The balance-matching heuristic *. Retrieved from http://faculty.chicagobooth.edu/neale.mahoney/research/papers/Mahoney_balance_matching.pdf

Goldin, C. (2014). Human capital. Springer-Verlag. Retrieved from https://scholar.harvard.edu/files/goldin/files/human_capital_handbook_of_cliometrics_0.pdf

Harrast, S. A. (2014). Undergraduate borrowing: A study of debtor students and their ability to retire undergraduate loans. Journal of Student Financial Aid, 34. Retrieved from http://publications.nasfaa.org/jsfa

Irby, L. (2019). What you need to know about debt consolidation. Retrieved March 20, 2019, from https://www.thebalance.com/what-you-must-know-about-debt-consolidation-960652

Jihène, S. (2013). Proceedings book of ICEFMO, 2013, Malaysia handbook on the economic, finance and management outlooks the impact of human capital on economic growth: Case of Tunisia, Morocco, Japan, and South Korea. Handbook on the Economic, Finance, and Management Outlooks, 11. Retrieved from http://www.conscientiabeam.com/ebooks/ICEFMO-8-18.pdf

Kagan, J. (2018). Debt avalanche. Retrieved February 10, 2019, from https://www.investopedia.com/terms/d/debt-avalanche.asp

Laroche, M., Mérette, M., Ruggeri, G. C., & Merette, M. (1999). On the concept and dimensions of human capital in a knowledge-based economy context. Canadian Public Policy / Analyse de Politiques, 25(1), 87. https://doi.org/10.2307/3551403

Mazzeo, C. (2007). Private lending and Student borrowing: A primer. In Frederick M. Hess (Ed.), Footing the tuition bill : The new student loan sector (p. 309). Washington D.C.: AEI Press. Retrieved from https://www.worldcat.org/title/footing-the-tuition-bill-the-new-student-loan-sector/oclc/122973919

ashaMelguizo, T. (2011). A review of the theories developed to describe the process of college persistence and attainment. In Higher education: Handbook of theory and research (pp. 395–424). https://doi.org/10.1007/978-94-007-0702-3_10

Mbah, R. E., Wasum, D. F., & Mende, C. M. (2020). Assessing the relationship between Pell Grant and Federal Student Loan at Louisiana four-year public institutions. Journal of Education and Practice, 11(9), 40–44. https://doi.org/10.7176/jep/11-9-04

Mbah, R. E. (2021a). A Possibility or Just a Wish? Assessing Current Perceptions on the Potentials of a Full Student Loan Debt Forgiveness Legislation. Advances in Social Sciences Research Journal, 8(10), 365–392. https://doi.org/10.14738/assrj.810.11091

Mbah, R. E. (2021b). Expanding the Theoretical Framework in Student Debt Research by Connecting Public Policy Theories to the Student Debt Literature. Advances in Social Sciences Research Journal, 8(11), 211–219. https://doi.org/10.14738/assrj.811.11196

Mincer, J. (1981). Human capital and economic growth (NBER Working Paper No. 803). Cambridge MA. Retrieved from https://www.nber.org/papers/w0803.pdf

National Debt Relief. (2012). Debt consolidation techniques – What you need to know. Retrieved February 11, 2019, from https://www.nationaldebtrelief.com/best-debt-consolidation-techniques/

Netcoh, S. (2016). The strengths and limitations of human capital theory in educational research and policymaking | Crosscutting Conversations in Education. Retrieved March 20, 2019, from http://blog.uvm.edu/cessphd/2016/01/19/the-strengths-and-limitations-of-human-capital-theory-in-educational-research-and-policymaking/

Oliver, M. L., & Shapiro, T. M. (2006). Black wealth, White wealth : A new perspective on racial inequality. Routledge.

O’shea, B., & Pyles, S. (2019). How to use debt snowball to pay off debt - NerdWallet. Retrieved February 10, 2019, from https://www.nerdwallet.com/blog/finance/what-is-a-debt-snowball/

Pant, P. (2018). Debt snowball vs. debt stacking. Retrieved February 10, 2019, from https://www.thebalance.com/debt-snowball-vs-debt-stacking-453633

Pelinescu, E. (2015). The impact of human capital on economic growth. Procedia Economics and Finance, 22, 184–190. https://doi.org/10.1016/S2212-5671(15)00258-0

Quadlin, N. Y., & Rudel, D. (2015). Responsibility or liability? Student loan debt and time use in college. Social Forces, 94(2), 589–614. https://doi.org/10.1093/sf/sov053

Ramsey, D. (2009a). The total money makeover (3rd ed.). Retrieved from https://cdn.ramseysolutions.net/publishing/TMMOv3sample.pdf

Ramsey Dave. (2009b). How to Get Out of Debt With the Debt Snowball Plan | DaveRamsey.com. Retrieved February 10, 2019, from

Rothstein, J., & Rouse, C. E. (2011). Constrained after college: Student loans and early-career occupational choices. Journal of Public Economics, 95(1–2), 149–163. https://doi.org/10.1016/J.JPUBECO.2010.09.015

Rustiadi, S. (2015). Creating better education system, building stronger human capital: a creative industries perspective. Procedia - Social and Behavioral Sciences, 169, 378–386. https://doi.org/10.1016/J.SBSPRO.2015.01.323

Ryan, J. (2011). Personal financial literacy. South-Western Cengages Learning. Retrieved from https://books.google.com/books?id=zdWrPiSGXY4C&pg=PA292#v=onepage&q&f=false

Sandy, B., & Diane, S. (1998). Life After Debt: Results of the National Student Loan Survey Selected Text From the Final Report. Journal of Student Financial Aid, 28. National Association of Student Financial Aid Administrators. Retrieved from https://publications.nasfaa.org/jsfa/vol28/iss3/1

Scott-Clayton, J. (2018). The looming student loan default crisis is worse than we thought: Background and data. Evidence Speaks Reports, 2.

Serio, A. (2019, September 18). Federal vs private student loans: Which is better? Retrieved November 13, 2019, from https://www.finder.com/federal-vs-private-student-loans

Trudel, R. (2016). Research: The best strategy for paying off credit card debt. Retrieved February 10, 2019, from https://hbr.org/2016/12/research-the-best-strategy-for-paying-off-credit-card-debt

Downloads

Published

2022-02-23

How to Cite

Mbah, R. E. (2022). Theoretical Framework in Student Debt Research: Linking Economic, Finance and Education Theories to Student Debt Literature. Advances in Social Sciences Research Journal, 9(2), 228–239. https://doi.org/10.14738/assrj.92.11761

Most read articles by the same author(s)