Using detailed, linked financial and education records from a national credit bureau and the National Student Clearinghouse, researchers at Washington University in St. Louis’ Center for Social Development and the University of North Carolina developed a measure called "debt-adjusted earnings." This measure estimates how student loan payments change the immediate financial returns from different postsecondary credentials.
The core finding is that degree holders earn on average $8,000 more per year than similar people who attended college but did not complete a credential. When loan payments are omitted, the average earnings premium is $10,400 per year. The researchers break down the share of extra earnings that go to loan payments by credential:
- Associate degree holders: about 9% of extra earnings.
- Bachelor’s degree holders: about 19%.
- Master’s degree holders: about 57%, though faster salary growth over time reduces this gap.
The team notes that undergraduate certificate completers have debt-adjusted earnings roughly $5,000 higher than those who did not complete such certificates. Jason Jabbari, a coauthor, argues the data show higher education remains a worthwhile financial investment and urges support for student completion. The authors warn that pending federal proposals, such as the One Big Beautiful Bill Act with new graduate borrowing caps and expanded gainful employment rules, could affect access to financing. They recommend that policymakers focus on expanding access to financing rather than constraining it. The research team includes Guangli Zhang, Xueying Mei, Yung Chun, Stephen Roll, and Mathieu Despard.
Difficult words
- debt-adjusted earnings — estimated earnings after loan payments
- credential — official qualification awarded after studycredentials
- postsecondary — education that comes after high school
- premium — extra money earned compared to similar people
- gainful employment — work that provides enough money or pay
- borrowing cap — legal limit on the amount one can borrowborrowing caps
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Discussion questions
- What are the possible effects of expanding access to financing for students, according to the study's findings?
- Why might faster salary growth over time reduce the gap in loan payment share for master’s degree holders? Give reasons from the article.
- How could the concept of debt-adjusted earnings influence a student's choice between different postsecondary credentials?
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