Bait and Switch: How Student Loan Debt Stifles Social Mobility (The Income and Wealth Effects of Student Loan Debt)

Scott et al. / Palgrave MacMillan / November 2023

Bait and Switch Book Cover

Today, approximately 44 million Americans hold around $1.7 trillion in student loan debt, with over 20% of borrowers in default. Over one million borrowers fall into default annually. In this chapter, the authors study the income and wealth effects from going to college stratified by race, first-generation status, and gender. Their findings show that Black and first-generation students have lower college completion rates, default more often on student loan debts, and gain much less of a wage premium from their college degrees and graduate degrees compared to White graduates. The authors also find significant racial and class differences in household wealth generation among college graduates, which is largely explained by many students lacking intergenerational wealth. The authors use the most recent data from the Federal Reserve Bank of New York’s Consumer Credit Panel and the Survey of Consumer Finances to study the changing size and distribution of student loan debt and default rates based on race, gender, and class.