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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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    File URL: https://economicdynamics.org/meetpapers/2017/paper_238.pdf
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    References listed on IDEAS

    as
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