Posted by: Discover Scholars | September 26, 2008

Financial independence or career satisfaction?

The Boston Globe (and Jacksonville Business Journal) reported today on a study that explored the effects of students’ debt on their career choices. While few of the findings are surprising, they’re useful for understanding the extent to which high education costs impact students.

Among some of the more interesting statistics:

  • “About half of today’s college students are willing to sacrifice career satisfaction for a bigger paycheck,”
  • “Nearly a third of the students said that student loans impacted their decision to choose a particular career,”
  • 47 percent of recent grads say their career pursuits are influenced by loan payments,” and
  • “About 40 percent took a job that provided higher pay, but less satisfaction, in order to pay off their loans.”

We’ve talked a lot about rising student debt lately. What we’ve neglected to discuss explicitly, however, are the reasons why this is a problem. After all, if students graduate with debt, but have little trouble paying it back, why is that a big deal?

This study reminds us that too much debt gives students an incentive to sacrifice their career interests for jobs that pay more. Indebtedness distorts the labor market for recent graduates, so that all else equal, we get fewer teachers and grad students and more investment bankers and law students.

We don’t believe that “taking a job for the money” is a problem in and of itself — after all, everyone has to strike a personal balance between a job that is both enjoyable and pays the bills.  It’s also important to interpret these statistics with a grain of salt: the Globe just as easily could have reported that “over 2/3 of students said loans had no effect on their career choice.”

But when high education costs are caused by preventable factors (financial aid linked to individual schools, artificially low interest rates, and crowding out effects from government grants), even a small percentage of students altering their career choices is sub-optimal and unacceptable.

Unfortunately, the number of students changing their career on account of outstanding debt is only likely to increase as government and private lenders continue to tighten their borrowing requirements.

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