Does Financial Satisfaction Vary Depending on the Funding Strategy Used to Pay for College?

• Published in: Journal of family and economic issues 2021-09, Vol.42 (3), p.429-448
• Main Authors: Henager, Robin, Anong, Sophia T., Serido, Joyce, Shim, Soyeon
• Format: Article
• Language: English
• Subjects: Alternative approaches; College students; Education; Family; Friendship; Funding; Grants; Higher education; Loans; Longitudinal studies; Money; Original Paper; Personality and Social Psychology; Satisfaction; Scholarships & fellowships; Social Policy; Social Sciences; Sociology; Student loans; Students; Thresholds; Undergraduate students
• ISSN: 1058-0476; 1573-3475
• DOI: 10.1007/s10834-021-09755-7

This study sought to determine whether the levels of financial satisfaction reported by college undergraduates and graduates differ in relation to whether they funded their college education by working or borrowing or a combination of the two. Data for this study came from a survey sample of full-time freshmen that formed the basis of a longitudinal study conducted at a large public university. Funding sources examined were grouped into those who worked only, those who borrowed only, those who worked and borrowed, and those who used grants, scholarships, or other sources of money to fund their college education. Compared to those who had student loans, those who had financed college with grants, scholarships, or other money (usually from family and/or friends) were more likely to report greater financial satisfaction than those who had used student loans to pay for college. There was evidence that this was only true during college rather than after college. The results obtained suggest that merely possessing a student loan may not necessarily decrease the level of financial satisfaction as many suspect, especially considering other funding alternatives such as working during college. While there was no significant impact of these funding strategies on financial satisfaction either during or after college, there was evidence for possible thresholds at which overall student loan balances may begin to erode financial satisfaction. The results obtained suggest that student loans may not decrease the level of financial satisfaction as much as many have suspected when compared with working to pay for college, as long as the amount of the student loan is not excessive, and is not accompanied by other types of debt (which also reduced financial satisfaction).