When does my future begin? Student debt and intragenerational mobility

Rauscher, Emily
Children's Savings Account
Publication type: 
Working Paper

Higher education funding policy rests on the assumption that college graduates enjoy equal opportunities for economic mobility regardless of how they finance their education. To examine this contention, this study compares the time it takes to move up the economic ladder for young adults who acquired student debt and those who did not. Findings reveal that college graduates who acquired student debt take longer to reach the midpoint of the net worth distribution than college graduates who financed their education without student debt. In fact, an additional $10,000 of student debt - only one third of the average amount college students acquire - is associated with a 26% decrease in the rate of achieving median net worth. Even after controlling for key differences, acquiring the relatively small amount of $10,000 in student loans is still associated with an 18% decrease in the rate of achieving median net worth. This study also finds some evidence that student debt is associated with a slower rate of reaching median income. An additional $10,000 in student loans is associated with a 9% decrease in the rate of achieving median income, although these differences do not emerge until about age 35. These findings suggest that over the course of a college graduate’s lifetime, those who acquired student debt have less opportunity to move up the economic ladder than their counterparts without student loan debt. Findings underscore the inequity created by the current U.S. system of financing higher education.


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Journal Citation: 

Elliott, W., Rauscher, E (2016) When does my future begin? Student Debt and intragenerational mobility. Lawrence, KS: University of Kansas, Center on Assets, Education, and Inclusion.

New Book Released

Today’s student loan system is in place because of a political compromise, and growing discontent with student debt may signal that this arrangement has run its course. While there are resources and organizations in place to help those struggling with debt, the time has come to consider a new direction for financial aid, William Elliott III and Melinda Lewis argue in “Student Debt: A Reference Handbook.”

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