The Labor Market Consequences of Student Loan Forbearance

Abstract

We examine how the pandemic-era federal student loan forbearance program affected individual-level labor market outcomes. Using a unique dataset of unemployment insurance claims, credit histories, and payroll records, we find that moral hazard was not a material side effect of student loan forbearance. For laid-off student loan borrowers, we find a positive but insignificant impact of forbearance on average job-search durations and no effects on reservation wages. We also find no significant effects of forbearance on the future earnings or hours worked of employed borrowers. The labor market effects of forbearance are muted across both constrained and unconstrained borrowers.

Keywords: Student loans, forbearance, student loan forbearance, labor income, moral hazard

JEL Classification: G50, D10, D14, R20