Debt burden after college: the effect of student loan debt on graduates’ employment, additional schooling, family formation, and home ownership

ABSTRACT

This paper measures the effects of undergraduate student loan debt on graduates’ post-college outcomes: employment, additional enrollment, family formation, home ownership, and net worth. The analysis uses data from a nationally representative sample of 2007–08 bachelor’s degree recipients. Because a graduate’s debt burden is not randomly assigned, we use an instrumental variable – enrollment-weighted average in-state tuition over four years – to estimate the effect of debt on post-baccalaureate outcomes while minimizing selection bias. We find that four years after graduating, undergraduate debt is related to borrowers’ earnings, job choice, decisions to marry and have children, and net worth.

KEYWORDS:

• Student loans
• debt burden
• financial aid
• post-college employment
• home ownership
• family formation

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Federal Student Aid Portfolio Summary: https://studentaid.ed.gov/sa/about/data-center/student/portfolio.

2. Former-president Obama’s American Graduation Initiative: https://obamawhitehouse.archives.gov/blog/2009/07/14/investing-education-american-graduation-initiative; Lumina Foundation Goal 2025: https://www.luminafoundation.org/goal_2025.

3. Whereas much of the previous research focused specifically on graduate enrollment, we expanded the definition to all post-bachelor’s degree enrollment, which includes enrolling in an additional bachelor’s degree program or other subbaccalaureate degree program after bachelor’s degree attainment.