Those Who Pay and Those Who Don’t: The Role of Family Support in Protecting Young Adults from Student Loan Debt

Katherine Pearson, Pennsylvania State University

Student loan debt represents a growing burden facing students today as they transition to adulthood. Using data from the National Longitudinal Study of Youth 1997, I investigate ways in which parents use their resources to protect their children from accumulating debt. Preliminary results suggest that receiving financial support from family substantially reduces the total amount of government and private loans that students take out, and that the size of this protective effect differs by the type of family support: gifts have a bigger negative effect on government and private loan debt than loans from family. I also find substantial racial differences in the effect of family support: receiving financial support from family has a larger protective effect for whites than for Hispanics or blacks. These results indicate that family plays a protective role in shielding young adults from debt, but that this protection is not equally available to all students.