May 19, 2019

How student debt causes lower incomes

Illustration of a graduation cap being weighed down by a ball and chain as the tassel.
Illustration: Aïda Amer/Axios

A new paper looking at student loans suggests that debt does come with more than just interest costs.

What they did: Three researchers, all of them business school professors, managed to persuade Equifax to give them detailed financial data on thousands of borrowers who had student loans from National Collegiate. When the company couldn't prove that it had chain of title, the borrowers' debts were discharged.

By the numbers: Does a significant student debt burden force you to earn more money, just so that you can repay your loans? Or does it just keep you stuck in a suboptimal job, when you might be able to earn more elsewhere?

  • The answer seems to be the latter.

The researchers report: "After the discharge, the borrowers' geographical mobility increases ... ultimately their income increases by more than $4,000 over a three year period, which is equivalent to about two months' average salary."

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