Does student debt reduce a person’s income and career prospects in later life?

Tech Billionaire Robert F. Smith recently pledged to pay off the student loans of an entire 2019 graduating class of Morehouse College in Atlanta.

NB we’re not talking small amounts of money – the cost of this is $40 million and it means wiping off $100K of debt in some cases.

 

According to Democrats leaving college saddled with debt has a negative impact on future careers. It’s not difficult to reason why: if you’ve got a $100K debt, you might end up getting stuck in a dead-end job to service debt payments rather than being able to do a lowly-paid trainee position for a year or more, which might well be required to get your foot on the career ladder.

Or as Elijah Dormeus (author of the tweet above) put it – he was going to carry on working at AT and T to pay off his debt, now he’s free to help his brother through college and set up a community foundation to help other financially challenged people through education.

This ‘natural experiment’ offers education researchers an interesting opportunity to do a comparative study of  the future career choices and prospects of the 2018 and 2020 classes, who will both be suffering debt on graduation, compare to this now debt-free class of 2019.

It seems like a good college to choose for such a ‘natural experiment’ as writing off loans should make a lot of difference given that the student body at Morehouse is all-male (so no gender differences to skew the results), predominately black (so one main ethnic group) and typically from poor backgrounds.

It would have been pointless doing this with a wealthy college where students are less likely to be debt conscious .

It will be interesting to see how this experiment unfolds, and I’ll be sure to keep you all posted!

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