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K-State Today

December 15, 2016



Gaulke awarded Spencer Foundation Small Grant for study on student loan repayment

By Noelle Blood

Amanda Gaulke, assistant professor of economics, has been awarded a Spencer Foundation Small Research Grant in the amount of $40,850 for her proposal seeking to study student loan repayment. The goal of this project is to examine how people with student loans move through repayment and what factors are associated with losing good standing during repayment.

Despite student debt exceeding credit card debt, little is known about how people transition through the repayment process. Gaulke and her co-investigators, financial economists Maxime Roy and Christopher Reynolds of the Office of the Comptroller of the Currency, seek to understand which factors affect people's ability to repay their loans, and to describe such dynamics as when and how people's loans go into default, deference or forbearance.

"The media often discusses student loans in a negative light but there isn't much current research that explains how student loans interact with other types of debt, such as credit cards and medical bills," Gaulke said.

Most available student loan studies show only a person's loan repayment status at certain points in time — five to 10 year intervals — and are too broad for government and banking stakeholders to put to productive use. Gaulke's research will provide clearer connections among types of debt, allowing financial institutions to determine better risk models for banks and credit unions.

"The field of economics I teach at K-State is all about how government intervenes in markets and whether intervention makes things better or worse," Gaulke said. "I am very interested in whether changes to the student loan program would help more students achieve a college degree."

Student loan contracts that are poorly designed can lead students to invest less in schooling and may also distort their future economic activities including homeownership and retirement. For example, while some students may be financially constrained and need help to make college affordable, they may be unwilling to take student loans if they feel the structure of the program and its uncertainties may leave them with debt they are unable to manage.

Gaulke will travel to Washington, D.C., to work on the project in person and travel to conferences to disseminate the findings.

The Spencer Foundation investigates ways research can improve education around the world and supports programs that strengthen and renew the educational research community. The Small Research Grants program is intended to support education research projects with budgets of $50,000 or less.