Debt-for-Opportunity? Student Loans and Economic Mobility

Yongseok Shin and Donghoon Lee

No 1476, 2016 Meeting Papers from Society for Economic Dynamics

Abstract: Using the FRBNY consumer credit panel, we examine the effect of student loan origination and performance on the future income and labor market mobility. While student loan repayment patterns are correlated with family backgrounds and educational achievements, no data set has observations on all the factors at the individual level. We take advantage of the address information in the panel of individuals with student loan takeouts and repayment behaviors, and link it to available aggregate income information at the zip code level in the IRS tax records. Controlling for the initial zip code and the associated average income at age 18, we find that most of the positive effect of student loan balance on future income measured by the new zip code disappears. Additionally we report the effect of student loan delinquency history on the future income and geographic mobility.

Date: 2016
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