Association for Public Policy Analysis & Management

Students enter college with the goal of better opportunities in the labor market, and therefore a better quality of life. Student loan policy was initiated to improve the equality of educational opportunity, and to allocate financial resources more efficiently: especially for low-income students, it helps them to have opportunities of the higher education. However, the total amount of student loan has increased up to $1.3 trillion as of 2017. As average student debt load increases, these students with loan feel more pressure to find a job immediately after graduation, since they need to pay back the amount. This pressure derives them to have myopic choices when they search for early-career occupation.

About 71% of college graduates have student loan debt, with an average balance of about $29,400. As a result of the increasing debt load, many college students have experienced problems and restrictions in their early-career labor market. This study examines the early-career labor market choices for college graduates who had student loan for financing higher education. Using 2015 National Survey of College Graduates (NSCG) data, we estimate the effect of student loan on wage and job satisfaction on their current job. In the analysis, we compare two groups of workers, one with the student loan to one without it. Using matching methods to fix the matched sample size ex ante and attempt to reduce imbalance as a result of the procedure, this study, first, finds that graduates who rely on student loan are more likely to participate in the labor market than those who don’t. Second, for entry level jobs, graduates who rely on student loan get lower salary than those who don’t. Third, graduates without student loan satisfy with the fringe benefits and job security more than their comparable counter group. College graduates make job-related decisions based on their current and future wage and fringe benefits. Graduates who have student loan show risk-averse behavior due to their financial restrictions. Students’ debt problems generate inequities in the early-career labor market for college graduates. This study can provide implications for policymakers and researchers about student loan.