Download This PaperGo Big or Buy a Home: The Impact of Student Debt on Career and Housing Choices
51 Pages Posted: 22 Mar 2021 Last revised: 17 Nov 2022
Date Written: March 16, 2022
Abstract
What is the impact of student debt on career and housing choices for college graduates? Exploiting supply-side variations in college grants, we show that student debt causes a persistent decrease in graduate school enrollment and earnings growth, but no delay in first-time home ownership. We then estimate a life-cycle human capital model and show that student debt imposes significant pecuniary and non-pecuniary trade-offs between career and housing choices, contributing to long-term earnings inequality. In addition, we analyze alternative student debt repayment plans. Relative to the baseline 10-year fixed repayment plan, an income contingent plan increases human capital and earnings growth, while a student debt forgiveness plan would only provide marginal additional earnings growth for indebted graduates.
Keywords: Student Loans, Human Capital, Housing
JEL Classification: I22, E24, J32, J38, R21
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