Academy of Financial Services Annual Meeting 2022

student loans, debt burden, financial aid, dispositional optimism

This paper analyzes potential links between extreme optimism and student loan debt. Extreme optimism is associated with imprudent financial choices as evidenced by a variety of savings and investment decisions. This paper explores whether these findings apply to student loan decisions. Using the most recent administration of Survey of Consumer Finances (SCF) data, we present evidence that extreme optimists tend to have higher student loan balances both in absolute terms and relative to income. Extreme optimists are also less likely to make payments on their student loan debt or to complete a degree for which debt is acquired.