Can Student Borrowing Lead to Bankruptcy?

Authors

  • Thomas C. O’Malley United States Air Force Academy
  • Brian C. Payne University of Nebraska Omaha

DOI:

https://doi.org/10.33423/jabe.v23i1.4050

Keywords:

business, economics, student loans, human capital, bankruptcy, financial distress

Abstract

This paper analyzes potential links between student loan debt and personal bankruptcy. It is nearly impossible to discharge education debt in bankruptcy. These loans have mandatory repayments that can manifest as financial distress for some borrowers. Distress may reach the point where some borrowers may seek bankruptcy protection for other, dischargeable debts. Results here suggest that student loan debt may supplement the existing credit card debt and adverse event explanations of bankruptcy. We present evidence from a nationally representative panel survey (NLSY79) that education debt is positively related to filing for bankruptcy among those with active student loans.

The views in this paper are solely the authors’ and do not reflect those of the US Government, Department of Defense, US Air Force, or US Air Force Academy.

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Published

2021-04-23

How to Cite

O’Malley, T. C., & Payne, B. C. (2021). Can Student Borrowing Lead to Bankruptcy?. Journal of Applied Business and Economics, 23(1). https://doi.org/10.33423/jabe.v23i1.4050

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Section

Articles