Working Paper 38
Graduate indebtedness: its perceived effects on behaviour and life choices – a literature review
Published June 2018

A new review of available research on the consequences of student loan debt suggests that student loan debt, particularly in the US, tends to have a negative impact on people’s lives after university. Specifically, it appears to have a negative impact on career choices, home ownership, health, finance, retirement, and, for women, getting married and having children.

The review, undertaken by Dr Ariane de Gayardon, Professor Claire Callender, KC Deane and Professor Stephen DesJardins from the UCL Institute of Education and the University of Michigan, examines whether and how having student loan debt influences decisions made by graduates – as well as those who fail to graduate – later in life. The authors draw on research evidence, mainly from the US but also from England, spanning the past 20 years.

Professor Callender commented: “The number of students relying on student loans to pay for their higher education is constantly rising, as is the amount they borrow. Yet we know little about the long-term consequences of this for society and individuals. What we do know from current research is concerning. Student loan debt seems to have a harmful effect on many aspects of graduates’ lives once they leave higher education.”

The review found that student loan debt discourages entrepreneurship, restricts career choices and leads to lower job satisfaction, although there was no consensus on whether it affects people’s earnings.

Student loan debt is likely to delay home ownership, although it is unclear whether the amount of debt owed has an effect. The review also found that for women, student loan debt is more likely to mean putting off marriage and children – although this wasn’t the case for men.

Existing research shows that people with student loan debt have lower levels of net worth, experience more financial distress, and have lower savings, pensions and retirement funds – particularly those who did not complete their degree. Health, particularly mental health, appears to be negatively affected by student loan debt, both during and after leaving university.

It is unclear whether the decision to undertake a postgraduate course is influenced by student loan debt. According to the review, the decision to study at postgraduate level depends rather on students’ socioeconomic backgrounds, the type of degree on offer and the university they attended as an undergraduate.

The review aims to identify new lines of inquiry and suggest how new research can build on the existing, but limited, body of knowledge. For instance, it is unclear from current studies whether student loan debt actually causes certain life outcomes, or is just associated with them. Similarly, as most studies reviewed were US-based, it is unclear whether their findings could apply to other countries.

CGHE will conduct further research on graduates’ attitudes towards student loan debt and their perceptions of its effects on their lives after university in England and the US. The research will look at graduates’ socio-economic and educational backgrounds, levels of debt, and the terms and conditions attached to their student loans. It will also explore implications for policy-makers in England and the US.