Student Loans and Early Post-Graduation Earnings: Evidence from Decomposition Analysis
43 Pages Posted: 7 Feb 2012
Date Written: February 7, 2012
Student loans increase educational opportunities for students from all backgrounds. They have also been criticized as imposing financial and psychological hardships. We employ the data from restricted-use National Surveys of Recent College Graduates to conduct an in-depth investigation of the relationship between student loans and post-graduation labor market outcomes. Graduates with loans have systematically lower earnings than graduates without loans. Decomposition estimations show that most of the earnings differential is due to factors related to the choice and performance in college and unobservables. Student borrowers could benefit from more information about net returns to higher quality education conditional on borrowing.
Keywords: human capital, student loans, earnings differentials, decomposition methods
JEL Classification: I22, J24, J31
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