Is Undergraduate Loan Debt Determining the Futures of Recent Graduates? A Study of the Impact of Student Loans on Graduates' Decisions to Pursue Further Education

Abstract

This study examines the 2000 and 2008 cohorts of the Baccalaureate and Beyond dataset in order to analyze the effect that undergraduate student loan debt had on the students’ decisions to apply to graduate school, postpone graduate school because of their debt or financial reasons, and plan to pursue graduate school in the future, when accounting for educational and demographic characteristics of the students. In terms of applications to graduate school, I find that students with debt, specifically those with larger amounts of debt, were more likely to have applied to graduate school for the year following their undergraduate graduation when compared to students without debt or small amounts of debt. When analyzing debt’s effects on postponements, I find that students with debt had higher probabilities of postponing their pursuit of a graduate degree. Regarding future plans for post-baccalaureate education, I find that students with more debt had higher probabilities of planning to earn a graduate degree at some point in their lives than those without debt. The results regarding applications and future plans are counterintuitive, likely stemming from the lack of variables that allow for the regressions to control for undergraduate institution price and selectivity, as well as a student’s willingness to borrow and future career plans.