Four Years After Graduating, Undergraduate Debt Burden Is Related to Borrower’s Earnings, Job Choice, and Family Formation

New RTI International study shows student loan debt is related to an increase in earnings, decrease in likelihood of having a child, being married


RESEARCH TRIANGLE PARK, NC — In a new research study, education researchers Erin Dunlop Velez and Melissa Cominole, from the nonprofit research institute RTI International, looked at how outcomes after completing a bachelor’s degree were related to student loan debt. Their report, Debt Burden After College: The Effect of Student Loan Debt on Graduates’ Employment, Additional Schooling, Family Formation, and Home Ownership, showed that, controlling for selection bias in the amount borrowed, student loan debt was significantly related to students’ employment and family formation four years after graduating.

“It is important that students have information about how student loan debt may continue to affect them, even after they exit postsecondary education,” says author Erin Dunlop Velez. “Students need to be able to make informed borrowing decisions and understanding how the amount they owe could impact other areas of their lives is an important part of that.”

Velez and Cominole found that four years after degree completion, for every additional $5,000 graduates had borrowed for undergrad, they:

  • Had an additional 5% in earnings;  
  • Were 4 percentage points more likely to have a job related to their major and 7 percentage points more likely to have a job that required a bachelor’s degree;
  • Had an 8 percentage point decrease in the likelihood of having been married and a 5 percentage point decrease in the likelihood of having a child;
  • Had a 7 percentage point increase in the likelihood of their net worth being negative.

Results from this study also showed that the amount borrowed had differential effects on employment and family formation by gender and dependency status. The study did not find a significant relationship between debt and other outcomes, such as the decision to work, the number of hours worked, the decision to enroll in additional schooling, and homeownership.

While some of these changes may seem positive, the findings indicate that graduates are making decisions that they would not have made otherwise, had they had less debt. For example, while students are choosing higher paying jobs today to be able to afford their loan payments, they may be compromising on other factors such as benefits or flexible work hours.

The latest numbers show that total outstanding student debt nationwide is nearing $1.5 trillion. Some two thirds of students receiving their bachelor’s degree take out student loans to fund their education, borrowing an average of $29,000. The need to borrow to cover the high cost of college affects students’ decisions about whether and where to attend college, as well as decisions they make while enrolled. But, as documented in this new study, student loan debt also has an impact well after students graduate from college.

The report is based on data from the National Center for Education Statistics’ 2008/2012 Baccalaureate and Beyond Longitudinal Study, which follows a nationally representative sample of 2007-08 bachelor’s degree recipients.