For every additional $5,000 that students borrow to finance their post-secondary education, they’re seven percent more likely to have a negative net worth four years after earning their degree, according to the results of a report released by RTI International today.

“It is important that students have information about how student loan debt may continue to affect them, even after they exit postsecondary education,” said Erin Dunlop Velez, the study’s coauthor.

The report, Debt Burden After College: The Effect of Student Loan Debt on Graduates’ Employment, Additional Schooling, Family Formation, and Home Ownership, measures the effects of undergraduate student loan debt on graduates’ post-college outcomes including employment, home ownership, decisions to pursue additional education, family formation, and net worth.

The report is based on data from the National Center for Education Statistics’ 2008/2012 Baccalaureate and Beyond Longitudinal Study, which follows a nationally representative sample of 2007-08 bachelor’s degree recipients.

Report: Students who ignore post-h.s. education, training take economic hit

The latest numbers from the Federal Reserve show that total outstanding student debt nationwide has surpassed $1.5 trillion, a dramatic increase from just ten years ago when the total student loan debt was $660 billion.  According to RTI International, nearly two-thirds of students receiving their bachelor’s degree take out student loans to fund their education and borrow an average of $29,000.

“When students are uninformed about all their postsecondary education options,” said Velez, “they make uninformed decisions.”  The need to borrow to cover the high cost of college affects students’ decisions about whether and where to attend college and the decisions they make while enrolled, the coauthors found.  And, as documented in the study, student loan debt has an impact after students graduate as well.

Additional earnings, delayed family

While the report did not find a significant relationship between total accumulated debt and a borrower’s decision to work, the number of hours worked, the decision to enroll in a graduate program, or likelihood of purchasing a home within the first four years after graduating, the amount of undergraduate debt accumulated by a degree-earning student is related to the borrower’s net worth, their job choice, the decision to marry and have children, and their earnings, the study found.

For every additional $5,000 that graduates had borrowed to complete their undergraduate program, they received an additional five percent in earnings in 2012, four years after the study cohort graduated with their bachelor’s degrees.

In 2012, students in the study cohort were also four percent more likely to have a job related to their major and seven percent more likely to have a job that required a bachelor’s degree for every $5,000 in additional student loan debt.

“We found that for each additional $1,000 someone borrowed, they earned 1 percent more 4 years later, or for each $5,000 borrowed, they earn 5% more,” said Velez.  “The baseline is whatever people would have earned in the absence of that change in debt.”

If someone did not borrow any money to complete their degree and earned $50,000 in 2012, had they borrowed $5,000, on average, they would have earned $52,500 in 2012, whereas if they had borrowed $10,000, on average, they would have earned $55,000 in 2012.

Yet graduates were eight percent less likely to be married and five percent less likely to have one or more children four years after they graduated for every additional $5,000 borrowed to complete their degree.

The findings indicate that graduates with increasing levels of debt are making decisions that they wouldn’t have made otherwise, were they to have less debt, the coauthors said.  And, according to a National Center for Education Statistics at the Institute of Education Sciences First Look report published in October 2017, many loan outcomes, including the percent of debt repaid and the default rate, are getting worse for students over time.

“We need to support policies that help provide better information to students so they can make more informed decisions,” said Velez.