Education, Jobs, Personal Finance

Constrained after college: Student loans and early-career occupational choices

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Last updated: June 25, 2012

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As of 2011, the average loan debt among all U.S. college graduates was $23,300; the median was $12,800.  The overall student loan burden stood at $870 billion, exceeding Americans’ aggregate credit card balance ($693 billion) and total outstanding auto loans ($730 billion). Do financial obligations significantly limit a student’s life choices or, as other research suggests, are these educational expenses trivial when measured against enhanced professional earnings over time?

A 2011 study from the University of California-Berkeley and Princeton University, “Constrained After College: Student Loans and Early-Career Occupational Choices,” estimates the effect of student debt on early career choices made by recent graduates attending a highly-selective university that eliminated student loans entirely in favor of grants in the early 2000s. Published in the Journal of Public Economics, the study compared the professional choices of three groups of students: students who received both loans and grants; student who received only grants; and students who received no financial aid.

Key study findings include:

  • “Debt leads graduates to choose higher-salary jobs. Much or all of this effect is across occupations, as debt appears to reduce the probability that students choose low-paid ‘public interest’ jobs. Debt effects are most notable on the propensity to work in the education industry.”
  • Students who received financial aid packages free of loan obligations shifted their focus from industries with higher salaries to those that offered lower salaries. (Over the study period, “there was little change in the industry composition of jobs taken by students not on aid.”)
  • Graduates with higher debt burdens chose jobs with higher salaries; for every additional $10,000 in loan obligations, a student’s post-graduation salary rose by $2,000 annually and “reduced the likelihood that an individual will take a job in nonprofits, government or education by about 5 or 6 percentage points.”
  • Debt had almost no effect on a student’s academic performance or his or her ability to secure a job after graduation.

The authors note that the premise that educational debt should have at most a small effect on career choices is not borne out by their data. It is also not clear from this study if financial aid candidates might benefit more over time from attending a less elite — and more affordable — school.

A related study in Education Economics, while based on older data, also concludes that loan burdens influence subsequent life and career choices.

Tags: youth, employment, student loans, higher education


Writer: | June 25, 2012

Citation: Rothstein, Jesse; Rouse, Cecilia Elena. “Constrained After College: Student Loans and Early-Career Occupational Choices,” Journal of Public Economics, February 2011, Vol. 95, Issues 1–2, 149–163. doi: 10.1016/j.jpubeco.2010.09.015.

Media analysis

Read the issue-related Huffington Post article titled "Graduates' College Debt Drives Career Choices, Students Can't Afford Nonprofit Jobs."

  1. What key insights from the journal article should reporters be aware of as they cover issues relating to student debt and its impact on career choices?

Study analysis

Read the study titled “Constrained After College: Student Loans and Early-Career Occupational Choices."

  1. What are the study's key technical term(s)? Which ones need to be put into language a lay audience can understand?
  2. Do the study’s authors put the research into context and show how they are advancing the state of knowledge about the subject? If so, what did the previous research indicate?
  3. What is the study’s research method? If there are statistical results, how did the scholars arrive at them?
  4. Evaluate the study's limitations. (For example, are there weaknesses in the study's data or research design?)
  5. How could the findings be misreported or misinterpreted by a reporter? In other words, what are the difficulties in conveying the data accurately? Give an example of a faulty headline or story lead.

Newswriting and digital reporting assignments

  1. Write a lead, headline or nut graph based on the study.
  2. Spend 60 minutes exploring the issue by accessing sources of information other than the study. Write a lead (or headline or nut graph) based on the study but informed by the new information. Does the new information significantly change what one would write based on the study alone?
  3. Compose two Twitter messages of 140 characters or fewer accurately conveying the study’s findings to a general audience. Make sure to use appropriate hashtags.
  4. Choose several key quotations from the study and show how they would be set up and used in a brief blog post.
  5. Map out the structure for a 60-second video segment about the study. What combination of study findings and visual aids could be used?
  6. Find pictures and graphics that might run with a story about the study. If appropriate, also find two related videos to embed in an online posting. Be sure to evaluate the credibility and appropriateness of any materials you would aggregate and repurpose.

Class discussion questions

  1. What is the study’s most important finding?
  2. Would members of the public intuitively understand the study’s findings? If not, what would be the most effective way to relate them?
  3. What kinds of knowledgeable sources you would interview to report the study in context?
  4. How could the study be “localized” and shown to have community implications?
  5. How might the study be explained through the stories of representative individuals? What kinds of people might a reporter feature to make such a story about the study come alive?
  6. What sorts of stories might be generated out of secondary information or ideas discussed in the study?

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How much protection does a college degree afford? – Journalist's Resource: Research for Reporting, from Harvard Shorenstein Center Sep 10, 2013 7:59

[…] rates for women are on the rise, while those for men are falling. Education can also mean significant debt, and that can affect early career and lifestyle choices. The for-profit sector is also growing […]

Students Question the Importance of a College Degree | Spare Some Change Oct 8, 2013 7:44

[…] to a study from the University of California-Berkeley and Princeton University, the overall student loan […]

Are recent college graduates finding good jobs? Journalist's Resource: Research for Reporting, from Harvard Shorenstein Center Jan 24, 2014 11:25

[…] a tough time of it. As state aid for education has fallen, student loans have risen, leading to crippling levels of debt — the median in 2011 was $12,800 — and limited options after graduation in a tight job […]

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