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

Nicolas Ziebarth and Martin Gervais ()
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Nicolas Ziebarth: Auburn University

No 238, 2017 Meeting Papers from Society for Economic Dynamics

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.

Date: 2017
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More papers in 2017 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
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