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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About the Author

Photo of Adam Felts
Adam Felts

Adam Felts is a researcher and writer at the MIT AgeLab. Currently he is involved in research on the experiences of family caregivers and the future of financial advice. He also manages the AgeLab blog and newsletter. He received his Master's in Fine Arts in Creative Writing from Boston University in 2014 and his Master's of Theological Studies from Boston University in 2019.

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