Project 2.4

The effects of student loan debt on graduates’ financial and life decisions in the UK and USA

The aim of this project was to investigate the effects of rising graduate indebtedness on graduates’ life choices in the US and England.

About this project

The increasing use of student loans to fund HE is a global phenomenon, fuelling HE expansion and participation, and social mobility. The policy goals of loan schemes around the world vary. In the US and England the central objective is cost-sharing.

In both countries loans seek to reduce public/state expenditure by shifting HE costs away from government and taxpayers so more of the costs are borne by students and/or their families. Simultaneously, loans facilitate, and make more acceptable, tuition fee increases.

The rebalancing of private and public/state contributions toward HE costs, especially since the 2008 global recession, has led to: higher tuition fees; student funding systems predicated on the accumulation of student loan debt; a majority of undergraduates dependent on loans to fund their studies; and far higher levels of graduate debt – all developments predicted to continue in the future.

Concerns about the scale of graduate debt and loan recovery have prompted changes in the design of student loan repayment mechanisms in the US. This and the recent HE reforms in England herald policy convergence, and make a comparative study particularly timely.

What is unknown are the longer term implications of rising indebtedness on graduates’ life choices, and the extent to which the loan repayment structures may influence these. No research on this topic has been conducted in England, while US research focuses rather narrowly on the links between debt levels and graduate financial, physical and emotional wellbeing.

Globally, loans may be a necessary instrument for status attainment and social mobility, but locally, how does the changing societal order of rising indebtedness affect the lives of young adults alongside broader structures of inequality and the political economy of contemporary society?

Policy implications

The key policy area this study addressed was student funding and finances, particularly student loans both in the UK and the US.


  • Start date: 1 April 2017
  • Completion date: 1 April 2020

Project methods

The research consisteed of:

  • a literature review of extant research on the effects of graduate debt on their financial and life decisions;
  • analysis of various national secondary data sources in the UK and US;
  • interviews with English graduates; and
  • analysis, writing up, and dissemination of findings.

Both the studies in England and the US  relied on the analysis of existing secondary data sets.

The English study analysed data derived from Next Steps (formerly known as the Longitudinal Study of Young People in England, LSYPE). Next Steps is a longitudinal study following the lives of people born in 1989-1990. When the survey started respondents were attending school in England and were aged 13-14. They were surveyed annually for seven years and an eighth time when aged 25. Data has been collected on their education, employment, family life, and well-being. Respondents’ parents were also surveyed in the first four waves.

Interviews were also conducted with a group of English graduates.

The study in the US drew on three nationally representative, student unit-record, longitudinal datasets.

The Beginning Postsecondary Students (BPS) dataset is a longitudinal survey that follows several cohorts of students for six years, beginning with their initial entry into college. For BPS: 96/01 and BPS: 04/09, survey data are supplemented with administrative data on borrowers’ student loans. Although the short observation window for the survey administered to students prohibits the analysis of questions related to life-course outcomes, the 20- and 12-year administrative data supplements, for the 96/01 and 04/09 cohorts respectively, enables a detailed exploration of borrowers’ repayment journeys following departure from college.

The Panel Study of Income Dynamics (PSID) dataset, administered by and housed at the University of Michigan, tracks a sample of individuals from birth through death. Relevant to the research questions at hand, the Transition to Adulthood Supplement (TAS) collects detailed information on individuals between the ages of 18 and 26, including student loan debt, employment and earnings information, as well as non-pecuniary outcomes (e.g., feelings of life satisfaction, financial responsibility, and employment opportunities). The nature of the PSID sample allows for observation of longitudinal outcomes among college attendees (both borrowers and non-borrowers) and non-college attendees. For the sample of individuals who attend college, the incorporation of restricted TAS data on college(s) attended also enables us to account for institutional characteristics that likely influence post-collegiate outcomes of interest.

The Baccalaureate & Beyond (B&B) dataset follows approximately 19,000 students who graduated from college in the 2007-08 academic year, and enables a detailed study of the differences between borrowers and non-borrowers with respect to life-course outcomes. Using this dataset, we can observe individuals’ post-collegiate experiences one year after graduation (2009) and four years after graduation (2012). Additionally, a ten-year follow-up (2018) is under way; depending on its release date, we may be able to incorporate this longer time frame into the study.

The researchers explored implications for policy on student finance, including the role and design of student loans; and the larger implications for theories of policy convergence and cross-border policy borrowing, and for the structures of social inequality.


Claire Callender
IOE, UCL’s Faculty of Education and Society and Birkbeck
Claire Callender is Professor of Higher Education Studies at IOE, UCL’s Faculty of Education and Society. She is a Deputy Director of CGHE. Claire led on CGHE Project 5, ‘Student loan debt and graduate decision-making’ which explored the impact of income-contingent student loan debt on English graduates’ lives using both quantitative and qualitative methods. It showed how loan debt can have negative effects on graduates’ lives.
Professor Stephen DesJardins
University of Michigan (US)
Stephen L. DesJardins is a Co-Investigator on CGHE Project 5, ‘Student loan debt and graduate decision-making’.
University of Twente

Ariane de Gayardon is Assistant Professor at the Center for Higher Education Policy Studies (CHEPS) at the University of Twente in the Netherlands. Her research focuses on the financing of higher education internationally and its interaction with equity, including topics such as free higher education and student debt.

KC Deane
University of Michigan


CGHE working papers

Additional publications