Why Do New Year and Christmas Babies Have Less Student Debt? (And Why Do ‘Eve’ Kids Have More?)

 December 13, 2019
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Christmas Babies

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Some say children born on Christmas get fewer birthday gifts and less celebration than those born at other times. But in fact, a new Student Loan Hero study shows that Christmas babies do get one very useful present at birth: the likelihood of less debt than the rest of us.

And it doesn’t stop there. People born on New Year’s Day also have less debt than the broader population. Yet for some reason, those born just a little earlier on Christmas Eve or New Year’s Eve have slightly more debt than average.

Here’s what we found about these unexpected correlations, as well as some thoughts on possible reasons behind them.

Key findings

  • Christmas Day babies typically owe 15% less student loans (or roughly $1,450) than the average across all other birthdays.
  • New Year’s Day babies owe 13% ($1,259) less in student loans than average.
  • Christmas Eve babies, on the other hand, owe nearly 4% ($356) more student debt than the average, and 21% ($1,808) more than those born on Christmas, just a day later.
  • New Year’s Eve babies owe 5% ($501) more in student debt than the average, and 20% ($1,760) more than those born one day later.
  • The disparity in debt isn’t limited to student loans: Christmas Day babies carry 1.5% less debt than the average for all borrowers, while those born on New Year’s Day owe 4% less than average. By contrast, New Year’s Eve babies carry about 5% more debt than the typical borrower, and Christmas Eve children owe about 4% above the average.

What a difference a day makes

The fact that those born on Christmas and New Year’s Day tend to have lower debt than average is striking enough — there’s no obvious reason for this, especially since not all Americans celebrate these holidays or celebrate them in the same way.

But the anomaly also extends to people born on the days just before these holidays. Why do they appear to have higher than average debt?

Adding to the puzzle, these trends are especially pronounced when it comes to student loans.

For example, the average debt for most types of credit differs between those born on Christmas and Christmas Eve by about 3% to 4%. But with student debt, the average difference between the two birthdays is a staggering 21%.

When a minute becomes a year

While there’s no complete answer as to why these birthdays make a difference for student loan debt, there are some factors that might be at play — particularly when it comes to the gap between those born on New Year’s Eve and those born 24 hours later.

Until recently, when you were born in relation to when the New Year ball drops determined when you started school. Prior research has shown that those who were older than their classmates during school entry tend to achieve more academically and professionally than those who are among the youngest in their class.

For instance, a 2017 study from the National Bureau of Economic Research found that those born just before the school year cutoff — meaning they were one of the oldest in their class — often had better academic outcomes, were more likely to complete college and were less likely to be incarcerated as juveniles.

Similar studies have shown that successful groups, ranging from CEOs to professional hockey players, are more likely to be born in the early months of the year.

This makes sense when you think about a child who was born at 11:59 PM on Dec. 31, 1990. Depending on where they lived, they may have entered kindergarten as the youngest member of their class in 1995 and competed academically with kids who were close to a year older. But if the child had been born on 12:00 a.m. on Jan. 1, 1991, they would have started school as the oldest member of the class in 1996. In other words, they would have an entire extra year to develop before being judged next to peers.

If the theory is correct that an early-year birth can bolster academic success, then it could in turn lead to more scholarships and grants, resulting in fewer student loans.

If this does prove to be a key driver of the student-debt difference between New Year’s Eve and New Year’s Day, then the gap between the two should be narrowing. While historically the Jan. 1 cutoff was used to decide whether a child could enter school, states have been moving the dividing line earlier in recent decades.

The Christmas Eve debt mystery

The difference between Christmas Day and Christmas Eve babies seems harder to figure out, so here we would need to speculate a bit more.

One possibility could be that families overcompensate for fear that those born on Dec. 25 miss out on all the attention a non-holiday birthday would bring. Because of that, it’s possible Christmas Day babies could actually receive more gifts than others — including financial gifts to jump-start their college savings funds.

Could having a birthday on Christmas or New Year’s Day, for that matter offer a subtle bias advantage. Those born on Dec. 25 might feel they’re special to have that birthday, bolstering their self-confidence. Or parents and others might treat those with a “special” birthday differently.

Comparing Student Loan Debt of Holiday Babies
Birthday Average Student Loan Debt Difference ($) to All Dates Difference (%) to All Dates
All Dates $9,958 $0 0.0%
December 24 $10,314 $356 3.6%
December 25 $8,506 -$1,452 -14.6%
December 31 $10,459 $501 5.0%
January 1 $8,699 -$1,259 -12.6%

Overcoming the birthday odds

While the reasons may be elusive, the data does show a significant gap between these holiday birthdays and those born on the respective eves. As a result, parents of children born on holiday eves and near school year cutoff dates may want to be extra vigilant.

One idea would be to make adding to your child’s 529 college savings plans or other savings accounts part of your December holiday tradition. In fact, it wouldn’t hurt to do this for all children, regardless of their birthday.

Likewise, even those born on Christmas Day won’t necessarily avoid crippling student debt. But no matter when your birthday is, there are ways you can make repayment easier.

Income-driven repayment plans can adjust your monthly debt costs based on how much you earn, keeping your student loan payments manageable. Or if you want to maximize savings over the life of your student loans, consider refinancing them at a lower interest rate, if possible.

Average Debt by Birthday
Birthday Average Student Debt Average Auto Debt Average Credit Card Debt Average Personal Loan Debt Average Other Debt Average Mortgage Debt Average Total Debt
All Dates $9,958 $12,261 $6,527 $4,163 $1,088 $67,434 $101,431
24-Dec $10,314 $12,564 $6,552 $4,600 $1,152 $69,741 $104,923
25-Dec $8,506 $12,182 $6,306 $4,460 $1,066 $67,401 $99,921
31-Dec $10,459 $13,081 $6,608 $4,241 $1,001 $69,850 $105,240
1-Jan $8,699 $12,140 $6,212 $3,828 $1,137 $65,308 $97,324