Clarion University faculty members Dr. Chad Smith, associate professor of administrative science, and Dr. Gustavo Barboza, associate professor of administrative science, recently presented at the 2009 Academy of Business & Financial Education Association conference held in Ft. Lauderdale Fla. Smith's and Barboza's paper examines the effects of debt management practices that college students possess while examining their current borrowing practices.
In this paper the empirical estimates of an Order Probit model using a sample of 283 students, indicate academic status and age are both positively related to the amount of debt a student carries. In this regard, females are more likely to hold debt compared to males.
The coefficient for the work variable was not significant indicating students leverage themselves above their means, even when they are not generating revenue. This high level of debt relative to their income implies that students live beyond their means and consequently develop unhealthy financial management practices. Furthermore, overconfidence, lack of personal financial knowledge, and easy access to credit formulate the core of high debt accumulation for college students. Finally, the exuberant irrational behavior of over borrowing is reinforced by students' academic status, gender (females), and age.
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