Student Loan Holding and Life Satisfaction: Evidence From Panel Data

Abstract

Given the soaring costs of higher education, financial aid is helpful to reduce the direct costs of college. Student loans are the most common financial support for college students. The purpose of this research was to estimate whether student loan holding and amounts were negatively associated with life satisfaction utilizing 2011, 2013, 2015, 2017, and 2019 waves of the Panel Study of Income Dynamics. This study utilized the fixed-effects-logit model to demonstrate the association. The results showed that holding student loans was negatively associated with life satisfaction. But there was no statistically significant association when student loans were measured as the actual amount. The existence of student loans rather than the amount was what was associated with decreased utility in the short term. This study mainly focused on the change of “within-group” effect on life satisfaction in the short run. The findings underscore the importance of education savings from parents and use of student loans on overall life satisfaction practitioners.