The student loan burden across the U.S. population stands at $870 billion as of late 2011, exceeding Americans’ aggregate credit card balance ($693 billion) and total outstanding auto loans ($730 billion), according to an analysis by the Federal Reserve Bank of New York. The average borrower now carries $23,300 in debt, and a snapshot of 2011 loan data suggests that some 27% of borrowers have past due balances. As the amount of student debt continues to increase, past research suggests that this issue could have significant individual and societal consequences.

A 2010 study from Clemson University published in Education Economics, “Effects of College Educational Debt on Graduate School Attendance and Early Career and Lifestyle Choices,” examines the impact that college debt has on subsequent life choices. The researcher analyzed college financial aid data from more than 7,000 subjects who graduated in 1992 and 1993; follow-up surveys in 1994 and 1997 captured self-reported data on post-college activities such as graduate school, home ownership and family formation.

Key study findings include:

• A $1,000 increase in debt for public college graduates reduced the likelihood of their attending graduate school within four or five years after earning their degree by 2.7 percentage points. For graduates of private colleges, however, there was no effect.
• The number of public college students enrolled in doctoral and professional post-graduate enrollment is strongly tied to debt levels. “A $1,000 increase in college debt reduces the probability of attending a doctoral program by 0.9 percentage points and the probability of attending an MBA or FP [first professional] program by 2.1 percentage points.”
• “Higher outstanding debt may induce students to choose more lucrative occupations in the short-term. This may lead to slower growth of earnings in the long term, or, more to the interest of the society, to an inefficient allocation of college graduates to private for-profit jobs at the expense of public-interest jobs such as teaching because of their lower payment.”
• “Of all the public college students, 68% have not attended any graduate program; 21%, 3.5% and 7.4% have attended a master’s, a doctoral, and an MBA or FP program, respectively. The percentages for private college students are 60%, 24%, 4.9% and 10.8%.”

The study concludes that “recent years have seen much higher levels of indebtedness of college graduates than in the early 1990s…. We might expect a larger effect of debt on post-baccalaureate decisions now than in the past.”

 Tags: higher education, student loans