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Addressing Student Debt in the Classroom

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Title: Addressing Student Debt in the Classroom
Language: English
Authors: Perkins, David, Johnston, Tim, Lytle, Rick
Source: Journal of Education for Business. 2016 91(3):117-124.
Availability: Routledge. Available from: Taylor & Francis, Ltd. 325 Chestnut Street Suite 800, Philadelphia, PA 19106. Tel: 800-354-1420; Fax: 215-625-2940; Web site: http://www.tandf.co.uk/journals
Peer Reviewed: Y
Page Count: 8
Publication Date: 2016
Document Type: Journal Articles
Reports - Research
Tests/Questionnaires
Education Level: Higher Education
Postsecondary Education
Descriptors: Student Loan Programs, Debt (Financial), Money Management, Financial Services, Teaching Methods, Classroom Techniques, Student Surveys, Student Attitudes, Feedback (Response), Behavior Change, College Students
DOI: 10.1080/08832323.2016.1140112
ISSN: 0883-2323
Abstract: Student debt is a national concern. The authors address debt in the classroom to enhance students' understanding of the consequences of debt and the need for caution when financing their education. However, student feedback indicates this understanding has a delayed effect on borrowing behavior and underscores the importance of making difficult behavioral changes sooner rather than later in order to lower student debt levels.
Abstractor: As Provided
Number of References: 10
Entry Date: 2016
Accession Number: EJ1094033
Database: ERIC
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  Value: <anid>AN0113740458;jeb01apr.16;2019Mar06.14:49;v2.2.500</anid> <title id="AN0113740458-1">Addressing student debt in the classroom. </title> <p>Student debt is a national concern. The authors address debt in the classroom to enhance students' understanding of the consequences of debt and the need for caution when financing their education. However, student feedback indicates this understanding has a delayed effect on borrowing behavior and underscores the importance of making difficult behavioral changes sooner rather than later in order to lower student debt levels.</p> <p>Keywords: financial aid; student debt; student loans</p> <hd id="AN0113740458-2">Introduction</hd> <p>Students in our classrooms are investing in their future. However, many students are accumulating a level of debt that can delay, or prevent, a positive return on that investment. Previous studies have focused on factors related to student debt such as demographic variables, student attitudes, student financial knowledge, and the effects of parental influence (Nonis, Hudson, Philhours, & Hu, [<reflink idref="bib6" id="ref1">6</reflink>]). Financial literacy has been shown to impact students' understanding of the long-term consequences of debt and may lead to reduced borrowing behavior. However, the general finding is that financial literacy among students is low. The contribution of the present study is to be intentional in bringing the discussion of student debt into the classroom to enhance financial literacy among students and reduce debt levels. A pedagogical benefit is the discussion of student debt can engage students with a relatable example that bridges the gap between personal experience and business concerns (e.g., the risks associated with financial leverage and fixed costs). We discuss student debt in the introductory financial accounting course. However, the topic of student debt can be a timely application in any business course that incorporates cost/benefit analysis into a decision-making framework. In this article, we highlight the growing problem of student debt and present our approach to encourage students to manage their student loans. We conclude with feedback from students regarding the discussion.</p> <hd id="AN0113740458-3">The problem of student debt</hd> <p>Student debt totaled $1.16 trillion as of the end of 2014 and is the largest category of consumer debt except for mortgages (Federal Reserve Bank of New York, [<reflink idref="bib3" id="ref2">3</reflink>]). A total of 71% of the class of 2012 carried debt at graduation with an average balance of $29,400 (Reed & Cochrane, [<reflink idref="bib7" id="ref3">7</reflink>]). Many students access private loans even though private student loans generally have higher interest rates and fewer protections for borrowers (Institute for College Access & Success, [<reflink idref="bib4" id="ref4">4</reflink>]).</p> <p>A 2013 survey of 9,523 borrowers with private student loans revealed a median private debt load between $25,000 and $35,000, and 28% of the private debt balances exceeded $50,000 (94% of the respondents also had federal loans). However, 40% of the respondents had incomes under $25,000 and over 75% earned less than $50,000. Many made significant sacrifices to make their loan payments: 47% delayed buying a house (15% were denied a mortgage); 47% delayed buying a car (21% were denied a car loan); 35% delayed starting a family; and 23% had put off starting a business due to their debt burden. The impact is multigenerational as parents put off retirement while paying their own student loans (Young Invincibles, [<reflink idref="bib9" id="ref5">9</reflink>]).</p> <p>A significant effect of student debt is its emotional burden. Excessive debt can feel similar to a financial prison for the indentured student (Lorin, [<reflink idref="bib5" id="ref6">5</reflink>]). Debt burden can increase relationship stress and lead to less marital satisfaction (Dew, [<reflink idref="bib2" id="ref7">2</reflink>]). The motivation to educate students about debt surpasses financial analytics.</p> <p>Significant consequences exist for loan delinquency and default. Remedies to alleviate debt burden (e.g., consolidation or cancellation) are often not available to borrowers in default. Student debt is generally not cancellable in bankruptcy except by court order. A loan in default may become due and the government may take legal action to sue, garnish wages, take receipt of federal and state tax refunds, deny professional license applications, and report the default to credit agencies, impacting the borrower's credit for years. A Federal Reserve Bank of New York survey found that loan literacy in the United States is poor and many who have student loan balances lack understanding of the consequences of delinquency and default (Zafar, Bleemer, Brown, & van der Klaau, [<reflink idref="bib10" id="ref8">10</reflink>]).</p> <hd id="AN0113740458-4">What is a manageable amount of student debt?</hd> <p>Students need to be informed on the potential consequences of using student loans and given direction to determine a "manageable" amount of debt to carry. The 8% rule is often recommended as an upper limit on student debt (Baum & Schwartz, [<reflink idref="bib1" id="ref9">1</reflink>]). This guideline has roots in the mortgage lending market and represents an upper limit for monthly commitments related to nonmortgage debt as a percentage of monthly gross income. However, it is derived from the lender's perspective to avoid the risk of default rather than manageability from the borrower's perspective. Also, the limit relates to all nonmortgage debt, not just student loans. Nevertheless, the 8% rule is a benchmark for determining a manageable level of student debt. One advantage of the 8% rule is it is easily estimated for a given income level. Using any reasonable benchmark to discuss student loan repayment is sobering and better than no discussion at all.</p> <hd id="AN0113740458-5">Addressing student debt in the classroom</hd> <p></p> <hd id="AN0113740458-6">Student debt and a personal budget</hd> <p>Our discussion occurs the day after discussing payroll withholdings...a somber discussion as students realize the impact of taxes and benefits on net take-home pay. A take-away from the payroll discussion is for students beginning their careers to get accustomed to their monthly cash flows before making significant financial commitments.</p> <p>With take-home pay fresh on their minds, students are challenged to think through their potential cash outflows. This raises the issue of nondiscretionary (e.g., housing, food) versus discretionary expenditures (e.g., entertainment, travel). Lifestyle choices are surfaced. For example, will you, the student, move back home, have a roommate, or live alone? Will you buy a new car or a used one? Will you have a smart phone? Cable? The point is to challenge students to think of the demands on their future paycheck whether or not they have loans. Often students are unaware of how much things cost. How much is, for example, auto insurance or utilities? This exercise points to the need for research to better estimate future cash outlays such as renting an apartment in Austin, TX.</p> <p>We then project the impact of loans on their future cash flows. One approach is to establish an upper limit on their loan balance at graduation to determine an allowable amount of borrowing per semester. We suggest the 8% rule as a starting point with an explanation of its origin and shortcomings. To implement the 8% rule, students must estimate their future salary. We provide outcome data for our business graduates for the past three years and give salary ranges specific to their majors: accounting, marketing, and so on. Salary data are presented on a scale showing the 25th percentile, median and 75th percentile. Students are encouraged to apply the 8% rule to the 25th percentile of the salary range for their major. For a student expecting a monthly gross income of $3,000 ($36,000 annually), the upper limit for a monthly loan payment would be $3,000 × 8%, or $240. Based on the estimated monthly payment we determine a targeted maximum loan balance at graduation for a given interest rate and repayment period (estimated from standard student loan terms).</p> <p>Continuing with the example, the interest rate for new federal loans is 4.66%; however, the rate on existing federal direct student loans is 6.8% (U.S. Department of Education, [<reflink idref="bib8" id="ref10">8</reflink>]). Additional rates apply for private loans. We use 5% for purposes of illustration. We then use the present value (PV) function in Excel 2013 (Microsoft Corporation, Redmond, WA) and inputs for the estimated variables, as follows: rate (monthly) =.05/12; number of payments for a 10-year standard repayment period (Nper) = 120; and the estimated monthly payment based on the 8% rule (Pmt) = $240. Based on these estimates, the loan balance at the time of graduation would be $22,628.</p> <p>For a four-year college experience, the loan each semester should not exceed $2,829 ($22,628/8 semesters) to stay below the targeted limit. Students can now evaluate their current position. If a student has been in school for three semesters and owes $12,000, their existing loans already exceed the prorated benchmark by $3,513 [($2,829×3) – $12,000].</p> <p>A second approach is to determine the monthly loan payment if a student's borrowing continues its historical trend. The sample student above has borrowed $4,000 per semester. Following this trend, the student will owe $32,000 at graduation. Using the PMT function in Excel and the same loan terms as above the monthly payment is $339. The students can put these payments into their budgets and determine their monthly net cash flow. This may be when students decide they will need to move up on the salary scale. Their grade point average can take on renewed significance to increase their marketability, a lesson best learned early in their college career.</p> <hd id="AN0113740458-7">Impact of addressing student debt in the classroom</hd> <p>The simplicity of the discussion brings a sense of reality that is hard to ignore. The impact is two-fold: first, students take a practical look at their educational investment. We open with: What is the MAXIMUM loan balance a student should have at graduation? One memorable response was that any level was okay since it was for an education! We then present the salary ranges for specific majors and repeat the question. The acceptable maximum debt is reduced significantly with this one data point. There are many nonfinancial benefits of an education, but the need for financial benefits cannot be ignored. Based on the personal budget exercise, students take a fresh look at their career options and the value of their education in the marketplace. One young lady said she was changing her major to accounting!</p> <p>Secondly, students are confronted with the debt they will face if they maintain their present course. As a benchmark, we provide a pie chart of loan balances of our previous business graduates. Figure 1 provides the May 2013 chart.</p> <p>Graph: Figure 1. Student loan balances for May 2013 business graduates.</p> <p>The colored zones represent salary ranges. The top of the green zone ($34,000) represents the annual earnings of the 25th percentile for our Bachelor of Business Administration graduates for 2011–2013. The bottom of the red zone ($50,000) represents annual earnings for the 75th percentile of this same group. Thus, based on the notion of keeping debt below an individual's expected beginning salary, the green (safe) zone represent debt levels that could be repaid with minimal distress by at least 75% of our graduates. Only 25% of graduates had starting salaries above $50,000, thus debt levels above this amount fall into the red (danger) zone. The yellow (cautionary) zone represents the 50% of students that make between $34,000 and $50,000 during the first year after graduation.</p> <p>As shown, 30% of the graduates had zero debt and another 35% had debt levels less than or equal to the 25th salary percentile (the green zone). Thus, 65% of these graduates have debt levels associated with low to zero stress levels. However, 9% of the graduates had balances between the 25th and 75th percentiles for starting salaries ($34,000–50,000) and 26% of the graduates had debt levels that exceeded the 75th percentile ($50,000).</p> <p>This data generates questions, such as, "Can I reduce my costs and loans while in college?" and "How do I increase my future earning power?" The value of education, return on investment, and financing strategies become practical realities motivating students to assess their own situations and develop strategies to improve future outcomes.</p> <p>We intend to continue tracking student loan balances at graduation. Our goal is to eliminate balances in the red zone of over $50,000 in student loans and minimize the number in the yellow caution area of $34,000–50,000. As a preliminary measure, we surveyed students one and two semesters after participating in the debt discussion to obtain their self-perceived changes in attitudes and behaviors.</p> <hd id="AN0113740458-8">Methodology and survey results</hd> <p>During the fall of 2014, we sent survey invitations to 193 students at a private, liberal arts university who had taken financial accounting in the previous two semesters.[<reflink idref="bib1" id="ref11">1</reflink>] Of the 73 students who went to the survey site, 10 students chose not to complete any of the questions, five indicated they were not in class on the day student debt was discussed in class, and there were missing responses from 13 other students. This left 45 students who completed the survey for a response rate of 23%. The distribution of respondents between the two semesters was fairly even: 25 (56%) had taken financial accounting one semester before the survey and 20 (44%) had taken the course two semesters prior to taking the survey.</p> <p>Of the 45 completed surveys, 22 were submitted by women and 23 by men. Regarding their major, 14 surveys were submitted by accounting majors, 20 by other business majors, and 11 surveys were submitted by nonbusiness majors.</p> <p>Table 1 provides a breakdown by year of college and whether the student expects to have a student loan balance at graduation. Of the 45 survey respondents, 18 (40%) do not expect to have a loan balance when they graduate. The remaining 27 students (60%) expect to owe money on student loans upon graduation.</p> <p>Table 1. Distribution by expected debt/classification.</p> <p> <ephtml> <table><thead><tr><td>Year of college</td><td>Expect zero debt</td><td>Expect to have debt</td><td>Total</td></tr></thead><tbody><tr><td>FR</td><td /><td>1</td><td>1</td></tr><tr><td>SO</td><td>4</td><td>11</td><td>15</td></tr><tr><td>JR</td><td>11</td><td>10</td><td>21</td></tr><tr><td>SR</td><td>3</td><td>3</td><td>6</td></tr><tr><td>GR</td><td /><td>2</td><td>2</td></tr><tr><td>Total</td><td>18</td><td>27</td><td>45</td></tr></tbody></table> </ephtml> </p> <p>10001 FR: freshman; SO: sophomore; JR: junior; SR: senior; GR: graduate.</p> <p>Our objective is to encourage lower debt levels for future graduates. We get preliminary feedback on this objective by testing the following hypothesis:</p> <p></p> <ulist> <item> <emph>Hypothesis 1</emph>: Students would expect a lower loan balance at graduation as a result of participating in the classroom discussion.</item> </ulist> <p>We asked the following two questions:</p> <p></p> <ulist> <item> <emph>Research Question 1</emph> (<emph>RQ1</emph>): My expected student debt at graduation is ____?_____.</item> <p></p> <item> <emph>RQ2</emph>: If we had not discussed student debt in class, my expected student debt would be _?_.</item> </ulist> <p>Students selected from a series of debt ranges from $0 to $49,999 in $5,000 increments (i.e., $0–4,999; $5,000–9,999; ...$45,000–49,999). The last option was $50,000 or more. The difference between the midpoints of each range selected estimates the reduction in debt a given student associated with their participation in the class discussion.[<reflink idref="bib2" id="ref12">2</reflink>] The 18 students who did not anticipate having a loan balance at graduation were excluded from the analysis. Table 2 provides the analysis of variance (ANOVA) results for the reduced sample of 27 students.[<reflink idref="bib3" id="ref13">3</reflink>] These students lowered their expected loan balance by a statistically significant amount of $4,629, almost 17% of the original expected balance.</p> <p>Table 2. Expected drop in debt by student borrowers (n = 27).</p> <p> <ephtml> <table><thead><tr><td>Expected debt</td><td>Original expected debt</td><td>Expected decrease</td><td><italic>t</italic> (<italic>df</italic> = 26)</td><td><italic>p</italic></td></tr></thead><tbody><tr><td>$22,778</td><td>$27,407</td><td>$ (4,629)</td><td>−3.359</td><td>.002</td></tr></tbody></table> </ephtml> </p> <p>If the discussion of debt is effective, students will be motivated to consider the long-term implications of debt reliance and support should be generated for the following hypothesis. (Following each hypothesis, the associated test variable is provided in [CAPITAL LETTERS]:</p> <p></p> <ulist> <item> <emph>H2</emph>: Students who participate in the debt discussion would think seriously about the financial burden that over-borrowing can create for years to come. [THINK]</item> </ulist> <p> If the discussion of debt is effective, students may develop strategies to reduce their debt reliance. We test debt-reduction strategies with the following hypotheses:</p> <p></p> <ulist> <item> <emph>H3a</emph>: Students who participate in the debt discussion would borrow less in the semesters following the discussion. [BORROW LESS]</item> <p></p> <item> <emph>H3b</emph>: Students who participate in the debt discussion would change their spending behavior. [CHANGE SPENDING]</item> <p></p> <item> <emph>H3c</emph>: Students who participate in the debt discussion would work to earn more money while in school. [WORK MORE]</item> </ulist> <p>We involve students in viewing their education as an investment—an investment financed with current or future dollars (i.e., debt). Discussing education from an investment perspective may enhance the perceived value of their education, supporting the following:</p> <p></p> <ulist> <item> <emph>H4</emph>: The debt discussion would positively affect student perceptions of the value of their education. [VALUE ED]</item> </ulist> <p>After considering the costs and benefits of education, students may change their major and/or career plans to enhance their future ability to repay their debt, thus supporting the following two hypotheses:</p> <p></p> <ulist> <item> <emph>H5a</emph>: Students who participate in the debt discussion would change their major. [CHANGE MAJOR]</item> <p></p> <item> <emph>H5b</emph>: Students who participate in the debt discussion would change their career plans. [CHANGE CAREER]</item> </ulist> <p>Measures for the variables noted in <emph>H2</emph> through <emph>H5</emph> were obtained by asking students to indicate agreement or disagreement with various statements (see the Appendix) on a 7-point Likert-type scale ranging from 1 (<emph>strongly agree</emph>) to 7 (<emph>strongly disagree</emph>). The first two columns of Table 3 provide the ANOVA results comparing the average responses to a neutral response of neither agree nor disagree (<reflink idref="bib4" id="ref14">4</reflink>). Results are reported separately for those who do (DEBTORS) and do not (NO DEBT) expect to have a loan balance at graduation. The last column of Table 3 provides a comparison of these groups.</p> <p>Table 3. Mean vs. neutral response.</p> <p> <ephtml> <table><tbody><tr><td /><td>Expect debt at graduation?</td></tr><tr><td /><td>No (<italic>n</italic> = 18)</td><td>Yes (<italic>n</italic> = 27)</td><td>Difference in means?</td></tr><tr><td /><td><italic>M</italic></td><td><italic>t</italic> (<italic>df</italic> = 17)</td><td><italic>p</italic></td><td><italic>M</italic></td><td><italic>t</italic> (<italic>df</italic> = 26)</td><td><italic>p</italic></td><td><italic>t</italic> (<italic>df</italic> = 43)</td><td><italic>p</italic></td></tr><tr><td>Think</td><td>2.17</td><td>−6.479</td><td>.000</td><td>2.04</td><td char=".">−7.756</td><td>.000</td><td>0.335</td><td>.739</td></tr><tr><td>Borrow less</td><td>3.78</td><td>−0.656</td><td>.521</td><td>3.89</td><td char=".">−0.313</td><td>.757</td><td>0.215</td><td>.831</td></tr><tr><td>Change spending</td><td>4.22</td><td>0.606</td><td>.552</td><td>3.96</td><td char=".">−0.116</td><td>.908</td><td>0.528</td><td>.600</td></tr><tr><td>Work more</td><td>3.78</td><td>−0.656</td><td>.521</td><td>3.19</td><td char=".">−2.740</td><td>.011</td><td>1.295</td><td>.202</td></tr><tr><td>Value ed</td><td>2.44</td><td>−5.102</td><td>.000</td><td>2.41</td><td char=".">−6.187</td><td>.000</td><td>0.092</td><td>.927</td></tr><tr><td>Change major</td><td>6.44</td><td>9.026</td><td>.000</td><td>5.67</td><td char=".">4.555</td><td>.000</td><td>1.708</td><td>.095</td></tr><tr><td>Change career</td><td>5.83</td><td>5.039</td><td>.000</td><td>5.52</td><td char=".">3.931</td><td>.001</td><td>0.563</td><td>.576</td></tr></tbody></table> </ephtml> </p> <p>The average responses for THINK are 2.17 (NO DEBT) and 2.04 (DEBTORS). Both are significantly different from a neutral response of 4.0, supporting <emph>H2</emph>. No significant difference was detected between the groups. Whether respondents expect a loan balance at graduation, they believe the debt discussion caused them to think seriously about the consequences of debt.</p> <p>The three variables associated with <emph>H</emph>3 targeted strategies that students may choose to reduce their debt reliance. The average responses for BORROW LESS (NO DEBT = 3.78; DEBTORS = 3.89) and CHANGE SPENDING (NO DEBT = 4.22; DEBTORS = 3.96) are not significantly different from a neutral response and no between-groups differences were detected for these two variables. <emph>H3a</emph> and <emph>H3b</emph> are not supported. Students do not think they have borrowed less or changed spending behaviors due to the class discussion.</p> <p>The average response for WORK MORE (3.78) for the NO DEBT group is not significantly different from a neutral response. However, for the DEBTORS the average response for WORK MORE (3.19) is statistically different from a neutral response, supporting <emph>H3c</emph>. Although significance was detected for one group and not the other, no between-group difference was noted. Apparently, students who expect a debt balance at graduation believe the class discussion motivated them to earn more even though the extra earnings have not resulted in reduced borrowing or changes in spending. This raises the question, "What are students doing with the extra dollars earned? [<reflink idref="bib4" id="ref15">4</reflink>]</p> <p>Table 3 provides support for <emph>H4</emph>. Mean responses for VALUE ED (2.44, NO DEBT) and (2.41, DEBTORS), both statistically significant, support the hypothesis that the class discussion led students to increase the perceived value of their education regardless of debt levels.</p> <p>The final two variables in Table 3 indicate lack of support for <emph>H5a</emph> and <emph>H5b</emph>. The average responses for CHANGE MAJOR (NO DEBT, 6.44; DEBTORS, 5.67) and the average responses for CHANGE CAREER (NO DEBT, 5.83; DEBTORS, 5.52) are all statistically greater than a neutral response of 4. Contrary to anecdotal evidence, on average, students do not believe the debt discussion affected their choice of major or planned career after graduation.</p> <p>Comparing men and women revealed no differences (.05 level) in the full or reduced (those expecting a loan balance at graduation) sample. When comparing majors, one significant difference was noted in the full sample regarding thinking about the financial burden of debt [THINK]: the average response of nonbusiness majors (1.64) indicated stronger agreement than the average response of business majors (2.24), <emph>t</emph> (<emph>df</emph> = 42.3) = 2.114, <emph>p</emph> =.04. This significance disappeared in the reduced sample.</p> <hd id="AN0113740458-9">Discussion</hd> <p>The survey results are encouraging. Discussing student debt in the classroom seems to enhance the perceived value of education as an investment and provides an increased understanding of the impact student debt burden can have on the future. These results are consistent for all students, whether or not they expect to rely on student debt to finance their education. Students who expect to have a loan balance at graduation indicate plans to reduce that balance due to the class discussion. However, these intentions have not yet resulted in a reduction in borrowing or spending behaviors. The most immediate behavioral change, based on student feedback, is an effort to work more in order to earn more, although, again, the added earnings have not resulted in reduced borrowing.</p> <p>Based on anecdotal feedback from one student who changed her major to accounting due to the debt discussion, we included a survey question to see if others had made similar changes in their majors or career plans. The survey results indicate that this was definitely not a common occurrence.</p> <p>Perhaps most interesting, the finding that nonbusiness majors, when compared to business majors, were more challenged to seriously consider the burden associated with student debt may indicate the classroom discussion is a wake-up call for those not typically engaged in financial discussions. This may point to a need to carry this conversation beyond the walls of the business school and encourage faculty in other disciplines to have a similar discussion with their students.</p> <p>In addition to the survey results, individual stories indicate the effort has motivated some students to take more ownership of their financial situation. Several students have followed up the classroom discussion by making appointments for financial counseling. One student indicated he was going to take on more of the financial responsibility for his education in order to alleviate the burden on his parents.</p> <hd id="AN0113740458-10">Limitations</hd> <p>Due to the sensitive nature of questions regarding personal indebtedness, the limited number of usable responses is not surprising. However, the small sample size and the nonrandom nature of the survey population (students taking accounting at a private university) limits the generalizability of the results. Additionally, the results are based on self-reported perceptions rather than objective measures of behaviors and, therefore, may reflect bias on the part of the respondents. Thus, generalizations based on these results should be made with caution.</p> <hd id="AN0113740458-11">Recommendations</hd> <p>The topic of student debt may be integrated into various pedagogical applications. Our focus on payroll and budgeting for cash flows seems to make an impression. One alumnus remembered our discussion and later requested a budget template for personal use. We've discovered, however, that using class time to develop a budget is inefficient and limits pedagogical value. In the future, we will give students the personal cash flow budget template (see Appendix B) on Excel with instructions to complete it before class in order to free up additional time for discussion.</p> <p>From a research perspective, future studies may compare the borrowing behaviors and attitudes toward debt of students at private versus public institutions. In addition, a deeper comparison of business and nonbusiness students may be informative. Perhaps students who are not already engaged in thinking about business topics, such as debt, have the most to gain from this type of discussion.</p> <hd id="AN0113740458-12">Conclusions</hd> <p>We began this project to connect with students and promote awareness of the long-term consequences of their present choices regarding the use of student debt. Perhaps the most informative findings of the present study are that, while students believe the debt discussion (a) has increased their awareness of the financial burden that comes with debt, and (b) has motivated them to decrease their expected level of debt at graduation, they have not yet changed their borrowing behaviors. By sharing this result with future students, we hope to impress upon them the need to be proactive and make difficult, behavioral changes in the near term in order to realize the longer term goal of debt reduction.</p> <p>Many factors can influence students' financial decisions and it would be difficult to determine the true impact of a classroom discussion. However, we believe the effort is worthwhile. While the ultimate goal of this activity is a reduction in actual debt balances (which we will monitor over time), the feedback is encouraging. One and two semesters later, students remember the discussion and feel it has impacted their attitudes and, to some extent, behaviors. We hope our experiences will be of benefit to other faculty members, in business and other disciplines, who are motivated to address the critical issue of student debt. We encourage others to engage students in this important discussion.</p> <hd id="AN0113740458-13">Notes</hd> <p></p> <hd id="AN0113740458-14">Appendix A: Survey questions</hd> <p>1. The classroom discussion of student debt challenged me to seriously think about the financial burden that over-borrowing can create for years to come.</p> <ulist> <item>2. In the semester or two since the class discussion of student debt, the amount I've borrowed has been less than the amount I would have borrowed if I had not heard this discussion.</item> <item>3. I changed my major primarily as a result of the class discussion of student debt.</item> <item>4. I changed my career plans as a result of the class discussion of student debt.</item> <item>5. I changed my current spending behavior primarily as a result of the class discussion of student debt.</item> <item>6. I worked to earn more money while in school primarily as a result of the class discussion of student debt.</item> <item>7. The class discussion of student debt has positively affected my perception of the value of my education.</item> </ulist> <hd id="AN0113740458-15">Appendix B: Montly cash budget template</hd> <p>Graph</p> <ref id="AN0113740458-16"> <title> Footnotes </title> <blist> <bibl id="bib1" idref="ref9" type="bt">1</bibl> <bibtext> Our Institutional Review Board approved the survey.</bibtext> </blist> <blist> <bibl id="bib2" idref="ref7" type="bt">2</bibl> <bibtext> The upper range has no midpoint, so the lower endpoint ($50,000) was used. Thus, overall debt values could be understated.</bibtext> </blist> <blist> <bibl id="bib3" idref="ref2" type="bt">3</bibl> <bibtext> No student originally expecting a loan balance at graduation changed his or her expectation to a zero balance as a result of the discussion.</bibtext> </blist> <blist> <bibl id="bib4" idref="ref4" type="bt">4</bibl> <bibtext> Students may have interpreted the question as targeting a reduction in spending. If so, the responses are logically consistent: The increased earnings are funding increased spending.</bibtext> </blist> </ref> <ref id="AN0113740458-17"> <title> References </title> <blist> <bibtext> Baum, S., & Schwartz, S. (2006). How much debt is too much? Defining benchmarks for manageable student debt. New York, NY: The College Board. Retrieved from <ulink href="http://research.collegeboard.org/sites/default/files/publications/2012/9/researchinreview-2006-12-benchmarks-manageable-student-debt.pdf">http://research.collegeboard.org/sites/default/files/publications/2012/9/researchinreview-2006-12-benchmarks-manageable-student-debt.pdf</ulink></bibtext> </blist> <blist> <bibtext> Dew, J. (2008). Debt change and marital satisfaction change in recently married couples. Family Relations: Interdisciplinary Journal of Applied Family Studies, 57, 60–71.</bibtext> </blist> <blist> <bibtext> Federal Reserve Bank of New York. (2015, February 17). Household debt continues upward climb while student loan delinquencies worsen [Press Release]. Retrieved from <ulink href="http://www.newyorkfed.org/newsevents/news/research/2015/rp150217.html">http://www.newyorkfed.org/newsevents/news/research/2015/rp150217.html</ulink>.</bibtext> </blist> <blist> <bibtext> Institute for College Access & Success. (2014). The project on student debt: Quick facts about student debt. Retrieved from <ulink href="http://ticas.org/sites/default/files/pub%5ffiles/Debt%5fFacts%5fand%5fSources.pdf">http://ticas.org/sites/default/files/pub%5ffiles/Debt%5fFacts%5fand%5fSources.pdf</ulink></bibtext> </blist> <blist> <bibl id="bib5" idref="ref6" type="bt">5</bibl> <bibtext> Lorin, J. (2012, July 8). Indentured students rise as loans corrode college ticket. Bloomberg.com. Retrieved from <ulink href="http://www.bloomberg.com/news/2012-07-09/indentured-students-rise-as-loans-corrode-college-ticket.html">http://www.bloomberg.com/news/2012-07-09/indentured-students-rise-as-loans-corrode-college-ticket.html</ulink>.</bibtext> </blist> <blist> <bibl id="bib6" idref="ref1" type="bt">6</bibl> <bibtext> Nonis, S., Hudson, G., Philhours, M., & Hu, X. (2015). Thinking patterns: An exploratory investigation of student perceptions of costs and benefits of college loan debt. Journal of Financial Education, 41(2), 24–48.</bibtext> </blist> <blist> <bibl id="bib7" idref="ref3" type="bt">7</bibl> <bibtext> Reed, M., & Cochrane, D. (2013). Student debt and the class of 2012. Oakland, CA: The Institute for College Access & Success: Project on Student Debt.</bibtext> </blist> <blist> <bibl id="bib8" idref="ref10" type="bt">8</bibl> <bibtext> U.S. Department of Education. (2014). Students. Retrieved from <ulink href="http://www.direct.ed.gov/student.html">http://www.direct.ed.gov/student.html</ulink>.</bibtext> </blist> <blist> <bibl id="bib9" idref="ref5" type="bt">9</bibl> <bibtext> Young Invincibles. (2013). Borrower in distress: A survey on the impact of private student loan debt. Retrieved from <ulink href="http://younginvincibles.org/wp-content/uploads/2013/05/Borrower-in-Distress-5.8.13.pdf">http://younginvincibles.org/wp-content/uploads/2013/05/Borrower-in-Distress-5.8.13.pdf</ulink>.</bibtext> </blist> <blist> <bibtext> Zafar, B., Bleemer, Z., Brown, M., & van der Klaau, W. (2014, June 5). Liberty street economics: What Americans (don't) know about student loan collections. Federal Reserve Bank of New York. Retrieved from <ulink href="http://libertystreeteconomics.newyorkfed.org/2014/06/what-americans-dont-know-about-student-loan-collections.html#.U9k9svldV65">http://libertystreeteconomics.newyorkfed.org/2014/06/what-americans-dont-know-about-student-loan-collections.html#.U9k9svldV65</ulink>.</bibtext> </blist> </ref> <aug> <p>By David Perkins; Tim Johnston and Rick Lytle</p> <p>Reported by Author; Author; Author</p> </aug> <nolink nlid="nl1" bibid="bib10" firstref="ref8"></nolink>
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  Data: Student debt is a national concern. The authors address debt in the classroom to enhance students' understanding of the consequences of debt and the need for caution when financing their education. However, student feedback indicates this understanding has a delayed effect on borrowing behavior and underscores the importance of making difficult behavioral changes sooner rather than later in order to lower student debt levels.
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