Cultural Barriers Document

ExecutiveSummaryGiven the central role higher education plays indetermining the material well-being of U.S. citizens,understanding the role of financial aid in helping studentsmanage the costs of postsecondary education is critical.The increased reliance on student aid in the form of loansmay have important consequences. A recent studycompared how college students paid for college inacademic year 1992-1993 and academic year 1999-2000,and found no increase in the percentage of studentsborrowing in the lowest-income quartile: roughly halfborrowed in both survey years. In sharp contrast, studentborrowing increased markedly for both middle-incomeundergraduates (from 32 to 45 percent) and high-incomeundergraduates (from 15 to 31percent).*The fact that recent increases in student borrowingseem to be limited to middle- and upper-incomestudents calls into question the effectiveness ofstudent loans in aiding low-income populations.Because there is a greater percentage of low-incomestudents in certain ethnic populations (see Exhibit 4) thisfinding also could be indicative of cultural aversions todebt.The ECMC Group Foundation has funded thisstatistical analysis to investigate and report on culturalattitudes toward borrowing money, and whether culturalattitudes affect student loan borrowing. Using data fromthe U.S. Census Bureau’s Survey of Income and ProgramParticipation (SIPP) and the U.S. Department ofEducation’s NationalPostsecondary Student Aid Study(NPSAS), we examined disparitiesamong ethnic groups in the willingness to financehigher education through student loans. We defined thegroups examined by combining U.S. Census Bureau ethnicitycategories in the SIPP data (White, African-American, Hispanic, Asian/Pacific Islander, NativeAmerican) with U.S. citizen status (native born citizensversus naturalized foreign born and noncitizens). Becauseof the way the U.S. Census and SIPP data are organizedwe were not able to break down these groups into furthersubgroups (i.e. within Hispanic and Asian/PacificIslander), or to include other groups (i.e. Middle-Eastern)in a statistically significant way.This study analyzed other types of debt in addition tostudent loans because by definition, student loans areonly taken out by students, and/or in some cases theirparents. Because we are interested in cultural differencesin borrowing, we needed to look at nonstudent familiesas well as student families. Accordingly, we also examinedother types of debt, using mortgage debt as our primarymeasure of different ethnic groups’ willingness to assumelong-term debt. Both student loans and mortgages can beclassified as “good-debt,” that is, borrowing money in areasoned way for good purposes. The strong correlationobserved in the SIPP data between mortgage debt andother consumer debt (e.g., auto loans, credit cards, etc.)suggests that mortgage debt also is a good measure for ahousehold’s general attitude toward borrowing.* Horn, L., Chang Wei, C. & Berker, A. (2002). “What students pay for college: Changes in the net price of college between 1992-93 to 1999-2000.” NationalCenter for Education Statistics, NCES 2002-174, Project Officer: Dennis Carroll. Washington, DC: U.S. Department of Education.ECMC Group Foundation • 4001 Office Court Drive • Building 700 Santa Fe, New Mexico 87507-4956 • Toll free: 866.FDN.ECMC • www.ecmcfoundation.org 2