Description of NC 2172 research group and its planned research.

1. NC2172 Update: Behavioral
Economics and Financial Decision-
Making and Information
Management Across the Lifespan
http://www.lgu.umd.edu/lgu_v2/homepages/home.cfm?trackID=15376
Michael S. Gutter, University of Florida
Jinhee Kim, University of Maryland
Barbara O’Neill, Rutgers University

2. NC2172
• North Central Multistate Research Project
• Multi-state research group composed of Extension specialists and teaching/research
faculty: http://www.lgu.umd.edu/lgu_v2/homepages/member.cfm?trackID=15376
• 10/1/13-9/30/18 research theme: Behavioral Economics and Financial Decision-
Making and Information Management Across the Lifespan
• The goal is to better understand consumers financial decision-making
across the lifespan.
• NC 1172 “The Complex Nature of Saving: Psychological and Economic Factors” 10/2008
to 09/2013
• Our previous research and additional studies over the past two decades clearly show
that psychological factors play a powerful role in influencing consumer decisions.

3. NC 2172
Need: While conventional consumer education focuses on providing
rational consumers with information, information management
research clearly shows that how consumers acquire and process
information may not always be optimal.
Objectives
1. Determine motivators that affect economic decision-making in
specific decision situations across the life-span of households
2. Determine barriers that affect economic decision-making in specific
decision situations across the lifespan of households
3. Determine how motivators and barriers to economic decision-
making can be manipulated in specific decision situations across the
life-span of households
4. Suggest strategies that can be used to improve consumer financial
decision-making

4. NC 2172
Methods
• Our study uses the behavioral life cycle model framework to
examine factors influencing the consumer decision making process.
• Our initial hypotheses focus on key factors such as the role of,
mental accounting, economic socialization, framing, self-control,
the role of information, on decisions related to retirement, home
ownership, student loan usage.
• This study proposes use of mixed methods to achieving its various
objectives.
Implications
• Results will inform efforts to improve financial decision-making
http://www.lgu.umd.edu/lgu_v2/homepages/outline.cfm?trackID=15376

5. Initial NC2172 Deliverables:
Student Loan Literature Review and Loan
Repayment
Refereed Journal Articles (FCSRJ)
Cho, S.H., Xu, Y, & Kiss, D.E.(2015, March). Understanding student loan
decisions: A Literature Review. Family and Consumer Sciences Research
Journal, 43(3), 229-243.
http://onlinelibrary.wiley.com/doi/10.1111/fcsr.12099/abstract
Johnson, C. (2015). Understanding federal loan repayment. Family and
Consumer Sciences Research Journal, 43 (4). p. 306-312.
Examines theories related to student loan debt, effect of student loans on
college education, and effect of student loans on post-school life
circumstances

6. College is Expensive!
• 2003-2013: State funding for colleges decreased by 12%
and median tuition rose 55% across all public colleges
• Students have two methods of elasticity in response to
increased college costs
– Select a lower cost college to attend
– Graduate with more student loan debt
Source: Higher education: State funding trends and policies on affordability (December, 2014). Washington, DC: Report
to the Chairman, Committee on Health, Education, Labor, and Pensions, United States Senate. U.S. GAO. Retrieved from
http://www.gao.gov/assets/670/667557.pdf.

7. Student Loan Overview:
Two Big Concerns
• Increasing frequency of use by students
– Going to college effectively means going into debt for
a majority of American college students
• Increasing outstanding student loan debt burdens
– College graduates
– Those who do not complete a degree program and
lack an income boost to help repay debt

8. Student Loan Statistics
• In 2010, total outstanding student loan debt rose to over $800 billion,
overtaking credit card debt for the first time, as well as auto loan
debt (only mortgages have a higher debt total):
https://www.aeaweb.org/articles.php?doi=10.1257/jep.26.1.165
• April 2015: Student Loan Debt Clock reports $1.3 trillion owed
– http://collegedebt.com/
• Average amount of debt owed by graduating students in 2013 was
$28,400: http://ticas.org/sites/default/files/legacy/fckfiles/pub/classof2013.pdf
• In 2012, 71% of all students graduating from 4-year colleges had
student loan debt
– http://ticas.org/sites/default/files/pub_files/Debt_Facts_and_Sources.pdf

9. More Student Loan Statistics
• Average cumulative debt of bachelor’s degree recipients
increased
– 9% between 2002-03 and 2007-08 school years
– 24% between 2008-09 and 2002-13 school years
– Graduates of for-profit colleges have higher amounts of debt
than those of public and private non-profit colleges
– http://trends.collegeboard.org/student-aid/figures-tables/average-
cumulative-debt-bachelors-recipients-public-four-year-time
• The monthly average student loan payment (2010 SCF
data): $242
– http://www.brookings.edu/research/papers/2014/06/19-typical-student-
loan-debt-akers

10. Student Loan Impacts
On Students
• “Generation indebted”
• Opportunity costs (e.g.,
“crowding out effect”)
• Postponed savings, reduced
wealth accumulation
• Emotional distress
• “Living a postponed life”
(marriage, family)
• Career choices
• Stifled entrepreneurship
On Society
• Reduced/delayed home and
auto purchases
• Decreased/delayed family
formation
• More young adults living with
parents and impacting parents’
finances
• Lifetime wealth loss impacts
(money that isn’t available to
be spent or invested)
• Stifled entrepreneurship

11. NC2172 Student Loan
Research: Focus Group Study
• Purpose: To understand decisions that students made with regard
to college selection and student loan borrowing
• Three rounds of data collection: two campus-based samples and a
sample via SSI
• Data collected via an online course platform that enabled students
to “talk” with one another
• Rich qualitative data indicating students’ decision-making
processes and their knowledge, thoughts, and emotions related to
student loan debt
• A journal article reporting research results is in progress

12. Focus Group Questions
• Question 1: How did you decide which colleges or universities to attend?
• Question 2: How did you feel about borrowing money for college?
• Question 3: What assistance/sources of help, if any, did you use before
making the decision to take out a student loan?
• Question 4: Tell me what you know about your loans.
• Question 5: How do you think your student loan debt will affect you
economically after graduation? Please explain. (Examples: your monthly
loan payment, ability to rent apartment, get a car; ability to buy a house or
how much house can be purchased, saving for retirement, starting an
investment program, maintaining a relationship that might lead to
marriage).

13. Focus Group Questions
• Question 6: What factors influenced your decision to accept the
type of financial assistance you are using?
• Question 7: How has the amount of financial aid you’ve
requested/received affected the number of college credits for
which you’ve enrolled?
• Question 8: Thinking back to a time when you received a student
loan refund (i.e. borrowed funds remaining after tuition and fees
were paid), tell us how you or someone you know, used those
available funds. (Examples: saved for a future semester, invested
the money, paid off other loans, room and board, miscellaneous
spending, etc.)

14. Focus Group Study Deliverables
• Data analyzed using qualitative analysis
techniques (data categories and counts)
• Article being submitted to Journal of Financial
Counseling and Planning
• Accepted NEAFCS meeting workshop (2015) on
the online focus group process

15. NC2172 Student Loan Research:
Online Experiment Study
Explore the role that information could
play in influencing the perceived value
or prudence one is making in a
hypothetical educational scenario

16. Basic Question
Does highlighting the return on an
educational investment influence the
perceived prudence of such an investment
–Use of hypothetical
–Control for level of personal
educational attainment, whether one
borrowed, satisfaction with that choice

17. Motivation to Attend College
From the list below please rank the reasons for attaining a
college degree with 1 being most import. Simply move the listed
options up or down to create your rank.
– Make more money
– Signal to others that you are intelligent
– Have a better work environment
– Enjoy the university experience
– Better employment opportunities
– Improved skills
– Increased knowledge
– Opportunity to meet new people
– Other (please list) ____________________

18. Scenario: Male
• Jonathan, age 18, will be graduating from high school in a few
months. He has been accepted to the state university which is about
three hours away from where he currently lives. Due to this
distance, living at home would not be a possibility if he attends the
university.
• Recent college graduates, on average, have $26,000 in student loan
debt upon graduation. In order to pay the $26,000 in student loan
debt, monthly payments of $270 would be made for 10 years.
• Jonathan is trying to decide if he should attend college or pursue a
career right out of high school. With his current resources he would
need student loans to pursue an undergraduate degree at the state
university.
• I have read Jonathan's situation and am ready to answer questions
pertaining to his education choices

19. Survey Question
• Do you think it is wise for Jonathan to take student loans in
order to pursue a college degree? On a scale of 1 to 5 where 5
is very wise to take out student loans and 1 is not wise at all to
take out student loans.
1 Not Wise 2 3 4 5 Very Wise
• How much in total should Jonathan be willing to take in student
loans in order to pursue this degree?
– $0
– $1 - $9,999
– $10,000 - $19,999
– $20,000 - $29,999
– $30,000 - $39,999
– $40,000 - $49,999
– $50,000 or more

20. Treatment
• Additional Information: On average, an individual
whose highest education level is a high school
diploma will make $1,912 less per month than
someone who has a bachelor’s degree.
Which of the following is correct?
• The average salary is higher for those with college
degrees than with high school diplomas
• The average salary is higher for those with high
school diplomas than with college degrees

21. More Treatment
• Additional Information: On average, an
individual with a bachelor’s degree will make
$1,912 more per month than someone whose
highest education level is a high school diploma.
Which of the following is correct?
• The average salary is higher for those with
college degrees than with high school diplomas
• The average salary is higher for those with high
school diplomas than with college degrees

22. Question
• Additional Information: Samantha has been
dreaming of attending college since she was in
middle school. It is all she talks about whenever
she is around family and friends.
• Which of the following is correct?
– Samantha is extremely interested in attending college
– Samantha is not very interested in attending college

23. Future NC 2172 Plans
• Complete four planned papers about
student loans using Experimental Study
data
• Study consumer decision-making related
to homeownership and Social Security
(retirement)

24. For Further Information
• See
http://www.lgu.umd.edu/lgu_v2/homepages/
home.cfm?trackID=15376
• List of 18 NC2172 members:
http://www.lgu.umd.edu/lgu_v2/homepages/
member.cfm?trackID=15376