Debt or low-wage work: exploring a theory of 'under-borrowing' to explain student decision-making towards funding postsecondary education

Abstract

This dissertation seeks to examine the prevalence and extent of the phenomenon of “under-borrowing:” postsecondary undergraduate students who choose to fund their education through working 20+ hours a week at low-wage employment rather than taking out federal student loans. A theory of under-borrowing was developed, followed by development and administration of a survey at two institutes of higher education. It was found that current under-borrowing behavior was exhibited by between 12% and 20% of participants. ☐ Financial literacy of survey participants was assessed through the use of Item Response Theory modeling, and was found to not have a statistically significant relationship with high school financial education mandates or under-borrowing behavior. Additional analysis of the FINRA Investor Education Foundation’s National Financial Capability Study suggested that required financial education may improve financial literacy and postsecondary funding decision-making.