Student Racial Differences in Credit Card Debt and Financial Behaviors and Stress

This study expands upon the work of Henry, Weber, and Yarbrough (2001) in examining the money management behaviors and financial outcomes of college students. The analysis was conducted using data from a sample that included an equal mix of African-American and non-Hispanic White students. It was found that African-American students held more credit card debt than others. When the relationships among race, credit card debt, financial behaviors, and financial stress were examined it was determined that credit card debt was positively related to both negative financial behaviors and financial stress. African-American students reported higher levels of financial stress than other students. The relationship between credit card debt, racial background, financial behaviors, and financial stress suggests that African-American students are affected more dramatically by debt than others. ********** Henry, Weber, and Yarbrough (2001) and Joo, Grable, and Bagwell (2003), among others, have noted a potential financial crisis on college campuses. Students are deluged daily with credit card offers and other enticements to go into debt. It has been estimated that 70% of all college students have and use credit cards (Joo et al.). The combination of consumer debt, educational loans, and poor financial management skills is leading some students to financial collapse. University administrators, faculty, and policy makers are generally aware that students who face financial stress tend to be more likely than others to drop out of school or significantly reduce the number of credit hours taken in order to work more hours. Generally, substituting work for study results in lower grade point averages and restricted access to on-campus extracurricular activities. This news is neither new nor pressing enough to draw university resources to rectify the situation. What is less well known is how credit card debt, financial behaviors, and financial stress differ based on racial background. The majority of studies to date that have examined credit card debt and student stress and academic achievement have used samples of predominately non-Hispanic White students. Studies that have examined the link between credit card debt and stress, for instance, using non-Hispanic White samples have shown that financial stress increases as debt rises. This study attempts to determine if the same relationship holds true for groups of students who are not non-Hispanic White. The answer to this question has potentially serious ramifications for university administrators. The recent push on many university campuses to provide access, support, and overall encouragement to African-American students offers an insight into how answering this question can impact the design of minority student outreach efforts. Outreach efforts are typically focused on providing under-represented students with academic undergraduate assistance, social assimilation, and career placement (Pope, 2004). Very few campus programs are designed to include personal financial management skills as part of outreach efforts. If racial differences in credit card debt, financial behaviors, and financial stress do, in fact, exist, and support for personal finance training is lacking, then comprehensive programs to enhance educational opportunities for under-represented students may be less than effective. The purpose of this paper is to provide evidence of potential student racial differences in credit card debt, financial behaviors, and financial stress on one college campus. The paper provides a starting point for thinking about what is happening on college campuses today in relation to training students about the importance of personal finance attitudes and behaviors. Background Review While the debate regarding whether or not racial differences exist in terms of personal financial knowledge, attitudes, and behaviors on college campuses, few can argue that such differences don't exist within the broader society. …