Student Debt Effects on Financial Well‐Being: Research and Policy Implications

Reviewing the data regarding effects of student debt on students’ financial outcomes following college – whether successful graduation or premature exit – makes clear that there is a price to pay for having to borrow money to go to college. Indebted college graduates have lower net worth, less home equity, and compromised ability to accumulate assets, as compared to their peers with the same level of education but no student debt. They may also experience poorer educational outcomes, with independent effects on earning power and, then, later wealth accumulation. Especially given the relationship between initial household wealth and children's later educational outcomes, these findings about the post-college financial outcomes of indebted students and graduates raise the specter of ongoing, sustained, and cross-generational perpetuation of societal divides. In the United States, higher education is valued not just as a good in itself, but also as a means to the end of greater economic security and the primary lever for economic mobility. Evaluating student loans through this lens underscores the long-term, volatile, and often hidden effects of student loan dependence and raises the stakes for consideration of alternative approaches to higher education finance.