Go 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

See all articles by Marc Folch

Marc Folch

University of Chicago; University of Pennsylvania

Luca Mazzone

International Monetary Fund (IMF)

Date Written: March 16, 2022


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

Suggested Citation

Folch, Marc and Mazzone, Luca, Go Big or Buy a Home: The Impact of Student Debt on Career and Housing Choices (March 16, 2022). Available at SSRN: https://ssrn.com/abstract=3805220 or http://dx.doi.org/10.2139/ssrn.3805220

Marc Folch

University of Chicago

Chicago, IL
United States

University of Pennsylvania

Philadelphia, PA
United States

Luca Mazzone (Contact Author)

International Monetary Fund (IMF) ( email )

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