Implications of Consumer Debt for Families Served by Child Support

• In Event: Enforcement and Beyond: Child Support Policy and Families with Limited Incomes

Abstract

Borrowing has become a common element of family finances. The ability to borrow can assist families in smoothing consumption, purchasing necessary goods and services that their current income will not allow, investing in human capital, and acquiring expensive but necessary items such as appliances, automobiles, and housing. At the same time, because debt is expected to be repaid, it may also lead to economic distress and, potentially, reduced consumption or ability to meet ongoing financial obligations. Research in the child support domain has not yet examined potential implications of noncustodial parent (NCP) indebtedness with child support order amounts, payment, and compliance. 

To begin to address this gap, we describe the relationship between debt holdings and child support outcomes of non-custodial parents, leveraging novel individual-level administrative data that include ‘mainstream’ and ‘alternative financial services’ (e.g., payday loans, small-dollar loans) credit reports for the entire population of Wisconsin from 2014-2023, which have been linked to the Wisconsin Administrative Data Core (WADC). The WADC includes the full population of administrative records spanning child support orders, receipts, and payments, employment and earnings, and social welfare program participation.

Our study aims to (1) describe the types (i.e., educational debt, mortgage/home equity debt, auto debt, unsecured debt) and amounts (i.e., absolute and relative to earnings, or debt-to-income ratios) of debt held by NCPs with child support orders and (2) estimate associations of specific types and amounts of debt with child support order amounts, payments, compliance (defined as percentage of child support order owed that is paid), and arrears, and (3) examine how these associations change over time using panel fixed effects OLS and cross-lagged models. We conduct these analyses for the full population of Wisconsin families with child support orders spanning the 2014 to 2023 period (294,167 NCPs with a child support order resulting in 11,766,680 NCP-quarters), and for subgroups defined by NCP earnings, education, race/ethnicity, prior marital status to the child’s CP, and urbanicity. This research has the potential to provide new insights into the types and amounts of debts held by NCPs, with implications for understanding family economic well-being and NCP ability to pay child support, and for informing child support and credit market regulation policy. 

Authors

• Lawrence M. Berger, University of Wisconsin-Madison
  Non-Presenting Co-Author

• Maria Cancian, Georgetown University McCourt School
  Non-Presenting Co-Author

• Trisha Chanda, University of Wisconsin-Madison
  Presenting Author