More than 46 percent of Dartmouth students graduate with less than $10,000
in their bank accounts, according to a study by economics professor Steven
Venti, Harvard Kennedy School of Government political economy professor David
Wise and Massachusetts Institute of Technology economics professor James
Poterba. The study, published in February and highlighted this month by The
Washington Post, found that students rely heavily on post-grad program stipends
after graduation.
The findings address one of the biggest concerns facing American college
students: how much money they need to save before graduating. The exact dollar
amount needed to graduate comfortably is highly debated, and many worry that
the current generation of near-graduates has not saved enough money, Venti
said.
“Rather than looking at people on the cusp of graduation and asking, ‘Are
they prepared?’ we look at people a year or two after college and ask, ‘Were
they prepared?’” Venti said.
The research suggests that most graduates were not adequately prepared for
graduation, he said.
With such limited financial assets after undergrad, the graduates often turn
to government programs such as Teach for America.
“What is novel about this paper, with echo boomers reaching graduation, is
that there is much question about how much these individuals are relying on
social safety nets rather than investing in their own assets,” Porteba said.
These benefits, combined with some graduate or doctoral program stipends,
provide less than $20,000 to 87 percent of recent-graduate households with less
than $10,000 in financial assets, according to Venti.
The study also suggests a link between low financial assets and
disproportionately poor health. When those with poor health and meager bank
accounts are confronted with unexpected expenses, they might not be able to pay
their bills, according to Venti.
“With few assets, these graduates are unable to withstand financial shocks
such as medical, home care and child rearing expenses not covered by their
insurance plans or employer benefits, or other health-related expenses such as
remodeling a home to accommodate a disability,” he said.
Even expenses such as travel or entertainment are difficult for such
graduates to afford, according to Venti.
The findings indicate that a reduction in benefits would directly lead to
reduced financial security for many young households, The Post reported.
“With health costs continuing to climb, these findings suggest that any cuts
in post-grad benefits will have a substantial impact on the well-being of the
young,” Venti said.
The researchers said that policies should encourage low and middle-income college
students to prepare more robustly for graduation.
The paper used data from the Health and Graduation Study, a longitudinal
study sponsored by the National Institute for Higher Education. The study surveyed
people under the age of 18 starting in 2005 and followed up every year until
2011, Venti said. The information about assets was used from the latest surveys
before the graduation of each participant.
The three professors have collaborated previously and have jointly published
30 papers over more than 20 years, according to Venti. Their research is funded
by the National Institute for Higher Education and the American Study Group on
Generation Y.
“This study is an example of how economics is becoming more collaborative
and interdisciplinary through joint research with experts from other academic
areas,” Porteba said.
