Open Access
Tang, Yuxin
Area of Honors:
Risk Management
Bachelor of Science
Document Type:
Thesis Supervisors:
  • Russell Wade Cooper, Thesis Supervisor
  • Ron Gebhardtsbauer, Honors Advisor
  • Nan Zhu, Faculty Reader
  • student loan
  • education
  • homeownership
  • r
  • defaulting
The level of outstanding student debt in the United States has been on the rise for the past decade, accompanied by rising tuition and default rates. According to Mitchell (2017), the count of defaults has reached around 4.6 million in the third quarter of 2017, doubling from the same quarter of 2013. Responding to these alarming trends, consumers are increasingly concerned about the potential impact of student loan on the future financial health of millennials. With the goal of examining student loans' impact on retirement security for individuals, this paper investigates the role student loan plays on households' portfolios and evaluates retirement readiness through the lens of homeownership. Owning a house provides a crucial source of income after individuals enter retirement due to two key reasons. Munnell, Hou, and Webb (2016) argue that housing value grows into the individuals' net wealth and owning a house removes the need to pay rent. In this paper, a three-period lifetime model depicts the interactive relationship between student debt level and financial security post-retirement. The simulated method of moments estimates the model with the statistical moments of empirical data. Observations from the model and data source suggest that high student debt level has a negative impact on individuals' retirement security by reducing the possibility of owning a home.