Investigating the Effects of Student Debt on Career Outcomes: An Empirical Approach

High student debt has been hypothesized to affect career choice, causing students to desire stable, high paying jobs. To test this hypothesis, I rely on plausibly exogenous variation in debt due to a federal policy shift. In the summer of 2007, the Higher Education Reconciliation Act (or HERA) expanded the cap for federally subsidized student loans. I examine how variation in debt affects career choice and eventual salary of students using data from the National Longitudinal Survey of Youth 1979 Child and Young Adult Cohort of students who were of college age during the implementation of the policy. I find that student debt has no impact on salary two years after graduation; however, it does seem to shift students’ career choices, leading some to avoid careers in public service industries such as teaching and social work.