Early-career millennials with two-year degrees are more financially vulnerable by age 30 than their peers with four-year degrees, according to a new study conducted by the National Endowment for Financial Education. 

While lack of affordable housing, student loan debt burdens and inadequate savings are common issues among millennials, the research shows distinct differences between debt profiles depending on their education level. 

NEFE, in partnership with Ohio State University, recently published a study examining types of debt held by individuals at age 30 that uncovered several inequalities between two- and four-year degree holders that highlight just how divergent these two pathways can become.

“Two-year college attendees experience major life events and transitions much differently than four-year degree holders, and these early experiences have profound, long-term effects on debt holding and financial precarity,” said Katherine Sauer, vice president of research and programs for NEFE. “It may be assumed that with time, the debt portfolios start to look the same. Instead these differences persist, and in some cases widen.”

According to an executive summary: “Community college attendees are at the forefront of this vulnerability. More diverse and often from lower-income family backgrounds, they represent a financially precarious population attempting to get ahead by investing in postsecondary education. On average they are more likely to start school later and stay in school longer despite a shorter overall degree program — only 39 percent have earned a two-year degree within six years of starting.” 

The research, led by Rachel E. Dwyer, Ph.D., at OSU, finds that individuals who only complete a two-year degree are more financially vulnerable than individuals with a four-year degree, and in some cases are even more vulnerable than those who have no degree. When compared with other degree holders, those with an associate’s degree:

• Are exposed to higher interest rates on student loans.
• Have more vehicle and credit card debt and a higher rate of loan delinquency.
• Experience more major life events, such as marriage and childbearing during the same period of their educational pursuit.

“Most data and assumptions about college debt focus on bachelor’s degrees, but these are not universally translatable to two-year degree holders,” said Sauer. “Understanding the unique challenges of two-year degree holders forces us in the research and education field to treat them as a distinct group rather than lumping them in with traditional four-year students.”

According to the study, financial precarity is broader than just student loans. In fact, the overall portfolio of debt holding likely contributes to the difficulty of managing student loan debt, especially in the early years before the returns on any degree come fully to fruition. The study captured and compared debt profiles of each type of degree holder at three points in time. From age 20 to 30, debt portfolios between degree pathways begin to diverge:

• Associate’s degree holders are more likely to have debt at age 20 than bachelor’s degree holders.
• By age 25, about 1 in 5 has a mortgage, and at age 30, a greater proportion of bachelor’s degree holders have house debt.
• Vehicle and consumer debt are more common at every age for associate’s degree holders.
• Both types of individuals are likely to hold credit card debt at age 25. The proportion of bachelor’s degree holders with credit card debt drops steadily over time, while associate’s degree holders see only a slight decrease.

For more information and to review the full study, click here.