By Jean Rhodes, Tyler Hull, and Karthik Kristnan
After a three-year pause, nearly 44 million federal student loan borrowers will soon be required to resume their monthly payments. Although much of the debate around student debt has centered on its sheer magnitude ($1.7 trillion), our new study sheds light on another, perhaps even more concerning aspect: the impact of loans on low-income students’ ability to pursue their interests and benefit from internships and mentoring. Drawing from a survey sample of nearly 50,000 college graduates, we capitalized on random variations of college and universities’ adoption of “no-loans” financial aid policies, which replaced loans with grant aid. Since certain students may have selected schools with no-loans policies, we restricted our sample to students who entered college the year prior to their implementation. We also included a wide variety of public and private schools: from elite universities (e.g., Harvard) to small rural schools (e.g., University of Minnesota Crookston), and from early adopters (e.g., Princeton) to late adopters (e.g., Colorado State University).
Overall, we found that students who graduated from no-loans policy schools were more likely to take jobs that were related to their majors during college and more likely to find major-relevant internships. These internships, in turn, were positively associated with on-time graduation, finding major-relevant employment, and overall job satisfaction. And, importantly, students from no-loans policy schools benefitted more from mentoring relationships with their professors and other caring professionals as they developed their interests and career paths. Taken together, these findings data show how debt can force students to take jobs that are not academically relevant and, in doing so, prevent them from accessing the opportunities and mentoring that enable them to pursue the campus experiences, internships, and jobs that can lead to life satisfaction.
Students are often told that the path to a satisfying, purposeful life is to find a career that is aligned with their interests and talents, even if it pays less. Devoting time to jobs that are more interest-aligned and absorbing can lead to specialized expertise and even periods of deeply satisfying “flow” states. It appears, however, that the process of career trial and error is unequally distributed. All college students, not just those who can afford it, deserve the academic- and career-related opportunities to refine their interests and talents. As we return to student loans, educational institutions and policymakers must find ways to increase low-income students’ access to college mentoring and scaffolded, experiential learning opportunities like the Career Opportunities Initiative and Step-Up’s Digital Community In to the expansion of no-loans payment policies, loan forgiveness and work–study and paid internship opportunities are needed. Expanding income-based repayment options will also be helpful in reducing the adverse effect of student loans. College matched-savings programs for qualified low-income students are needed as is additional state support for public universities to rein in spiraling tuition. Such prorgrams and policies will ensure that students have the latitude to pursue their interests and the necessary training and support to find good-paying jobs that keep up with our changing economy.
Tyler Hull is Assistant Professor of Accounting and Finance at the University of Massachusetts, Boston, and Karthik Krishnan is Associate Professor, Finance at Northeastern University and Co-Founder and CEO of MentorWorks.