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Life after Debt: Post-Graduation Consequences of Federal Student Loans

Author

Listed:
  • Nicolas Ziebarth

    (Auburn University)

  • Martin Gervais

    (University of Iowa)

Abstract

We estimate the causal effect of student loans on post-graduation outcomes exploiting a kink in the formula determining the eligibility for need-based federal student loans. Using a nationally representative sample of students graduating with a bachelor's degree in 1993, we establish that student debt leads to lower earnings soon after graduation, an effect which dissipates over time. Surprisingly, the negative effect on earnings is driven by a decline in hours worked rather than the wage rate. Students with debt tend to be less ``choosy'' on the job market: they are more inclined to accept part-time jobs as well as jobs that are less related to their degree and offer limited career potential.

Suggested Citation

  • Nicolas Ziebarth & Martin Gervais, 2017. "Life after Debt: Post-Graduation Consequences of Federal Student Loans," 2017 Meeting Papers 238, Society for Economic Dynamics.
    • Handle: RePEc:red:sed017:238
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    Cited by:

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    2. Mi Luo & Simon Mongey, 2019. "Assets and Job Choice: Student Debt, Wages and Amenities," NBER Working Papers 25801, National Bureau of Economic Research, Inc.
    3. Berrak Bahadir & Dora Gicheva, 2022. "Macroeconomic Implications of Student Debt: A State‐Level Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(8), pages 2273-2300, December.
    4. Wright, Nicholas A., 2021. "Need-based financing policies, college decision-making, and labor market behavior: Evidence from Jamaica," Journal of Development Economics, Elsevier, vol. 150(C).
    5. Lisa J. Dettling & Sarena Goodman & Sarah Reber, 2022. "Saving and Wealth Accumulation among Student Loan Borrowers: Implications for Retirement Preparedness," Finance and Economics Discussion Series 2022-019, Board of Governors of the Federal Reserve System (U.S.).
    6. Chu, Yu-Wei Luke & Cuffe, Harold E, 2020. "Do Struggling Students Benefit From Continued Student Loan Access? Evidence From University and Beyond," Working Paper Series 21067, Victoria University of Wellington, School of Economics and Finance.
    7. Katharine G. Abraham & Emel Filiz-Ozbay & Erkut Y. Ozbay & Lesley J. Turner, 2022. "Effects of the Menu of Loan Contracts on Borrower Behavior," Management Science, INFORMS, vol. 68(1), pages 509-528, January.
    8. Mi Luo & Simon Mongey, 2019. "Assets and Job Choice: Student Debt, Wages, and Job Satisfaction," 2019 Meeting Papers 1220, Society for Economic Dynamics.
    9. Ji, Yan, 2021. "Job Search under Debt: Aggregate Implications of Student Loans," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 741-759.
    10. Maurice Shirley & Amanda Olsen & Sehee Kim & Michelle Dimino & Mehmet Kaplan, 2023. "Heading in the Right Direction? Examining the Relationship of Transfer Patterns and Income Status on College Student Outcomes," Research in Higher Education, Springer;Association for Institutional Research, vol. 64(6), pages 808-833, September.
    11. Binh Chi Bui, 2024. "How Debt and Attainment Relate through the GPA of Non-White College Students," Social Sciences, MDPI, vol. 13(8), pages 1-18, August.

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    More about this item

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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