The long-run impact of the Great Recession on student debt

Abstract

This paper investigates the effect of local labor market shocks during the Great Recession on subsequent student debt-related outcomes for a panel of 1 million student loan borrowers between the ages 17 and 34 in 2009, following that cohort’s credit reports for the subsequent 10 years. We find that the Great Recession significantly increased student indebtedness, delinquency and default on student debt, and overall non-repayment of student loans. The Great Recession’s effect on student indebtedness amplifies throughout the length of the panel, through 2019. We find that re-enrollment in higher education in response to the recession and declining state and local funding for public institutions are two likely mechanisms by which the recession exerted such a long-term impact on the financial status of student borrowers, beyond the initial economic shock and the sluggish labor market recovery.