Student Debt Loans and Labor Market Outcomes: A Lesson in Unintended Consequences
DOI:
https://doi.org/10.33423/jabe.v27i2.7585Keywords:
business, economics, student loan, wage differential, unintended consequences, risk-aversion behavior, loan policyAbstract
The student loan policy was initiated to improve the equality of educational opportunities and help low-income families provide higher education opportunities for their children. However, with the average student loan amount increasing, recipients experience problems and restrictions in their early-career choices. This study examines the early-career labor market choices of college graduates who obtained student loans to finance their higher education. We used the National Survey of College Graduates data to estimate the effects of student loans on the employment status and current wages of college graduates. In this research, we compared two groups of workers: those with student loans and those without loans. Using basic models and Mahalanobis distance matching, we found that graduates who rely on student loans are more likely to participate in the labor market than those who do not. Graduates with student loans tend to demonstrate risk-averse behaviors due to their financial restrictions. Thus, student loan debt creates inequity in the early-career labor market for college graduates.
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