Factors Contributing to the Financial Self-Efficacy of Student Loan Borrowers
by Adam Felts
AgeLab researchers have published a paper with the Association for Financial Counseling & Planning Education (ACFPE) on the factors that contribute to financial self-efficacy among student loan borrowers.
Financial self-efficacy refers to one's sense of mastery and control over their financial situation. Studies indicate that higher levels of financial self-efficacy are related to improved savings behavior, greater initiative toward retirement planning, and lower student debt. In some studies, self-efficacy in general has been found to be more correlated with positive outcomes than objective capacity or ability.
The AgeLab paper examined student loan borrowers' levels of financial self-efficacy and factors that might explain differences between them.
Borrowers’ self-assessments of their knowledge of student loans and repayment mechanisms prior to loan accrual was significantly associated with current financial self-efficacy.
Additionally, female borrowers reported significantly lower levels of self-efficacy than male borrowers. African-American borrowers demonstrated higher levels of financial self-efficacy than the reference group of white borrowers.
The authors conclude that early financial education specifically focused on student loan literacy may be a factor contributing to student loan borrowers’ financial confidence later in life. Borrowers who receive this support may experience great confidence in meeting their long-term financial goals.
Samantha Brady, Julie Miller, Lexi Balmuth, Lisa D'Ambrosio, and Joseph Coughlin are credited as authors of the paper. More information can be found via ACFPE.
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