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Amid dialogue about the soaring student loan burden, questions arise about how educational characteristics (school type, selectivity, and major) affect disparities in post-college labor market outcomes. In this post, we specifically explore the impact of such school and major choices on employment, earnings, and upward economic mobility. Insight into determinants of economic disparity is key for understanding long-term consumption and inequality patterns. In addition, this gives us a window into factors that could be used to ameliorate income inequality and promote economic mobility.
Rajashri Chakrabarti, Nicole Gorton, Michelle Jiang, and Wilbert van de Klaauw
This post is the second in a two-part series on student loan default behavior. In the first post, we studied how educational characteristics (school type and selectivity, graduation, and major) and family background relate to the incidence of student loan default. In this post, we investigate whether default behavior has varied across cohorts of borrowers as the labor market evolved over time. Specifically, does the ability of student loan holders to repay their loans vary with the state of the labor market? Does the type of education these students received make any difference to this relationship?
Rajashri Chakrabarti, Nicole Gorton, Michelle Jiang, and Wilbert van der Klaauw
This post seeks to understand how educational characteristics (school type and selectivity, graduation status, major) and family background relate to the incidence of student loan default. Student indebtedness has grown substantially, increasing by 170 percent between 2006 and 2016. In addition, the fraction of students who default on those loans has grown considerably. Of students who left college in 2010 and 2011, 28 percent defaulted on their student loans within five years, compared with 19 percent of those who left school in 2005 and 2006. Since defaulting on student loans can have serious consequences for credit scores and, by extension, the ability to purchase a home and take out other loans, it’s critical to understand how college and family characteristics correspond to default rates.
A Conversation with Jaison R. Abel and Richard Deitz
With the 2017 college graduation season in full swing, we thought it would be helpful to take stock of the job prospects for recent college graduates. Is now a good time to be graduating from college? Publications editor Trevor Delaney caught up with Jaison Abel and Richard Deitz, two economists in our Research and Statistics Group, to discuss some of their work on the labor market for recent college graduates.
Rajashri Chakrabarti, Nicole Gorton, and Wilbert van der Klaauw
Evidence overwhelmingly shows that the average earnings premium to having a college education is high and has risen over the past several decades, in part because of a decline in real average earnings for those without a college degree. In addition to high private returns, there are substantial social returns to having a well-educated citizenry and workforce. A new development that may have important longer-term implications for education investment and for the broader economy is a significant change in the financing of higher education. State funding has declined markedly over the past two decades, a trend that has coincided with a significant increase in college tuition. To cover the rising cost of college, students and families have increased their reliance on student loans, funding a greater share of an increasing overall college cost. While the federal student loan program has undoubtedly helped mitigate the impact of higher costs on college access and enrollment, more and more students now leave college with higher amounts of debt. Given these trends, it is critical to understand whether holding student debt has affected young Americans’ later life outcomes, such as homeownership.
Rajashri Chakrabarti, Andrew Haughwout, Donghoon Lee, Joelle Scally, and Wilbert van der Klaauw
An examination of recent developments in household borrowing was the focus of a press briefing held this morning at the New York Fed. President William Dudley offered opening remarks on the latest developments, then Bank economists briefed the press on their analysis of household indebtedness, placing a spotlight on student loans. Their research is based on the New York Fed Consumer Credit Panel—which is based on Equifax credit report data—as well as data from the National Student Clearinghouse. The presentation contained three components: (1) an analysis how aggregate household debt today differs from its 2008 peak, (2) new evidence on student debt growth, delinquency and repayment, and (3) an investigation of the relationship between homeownership, student debt, and educational attainment.
Nora Fitzpatrick, Laura Pilossoph, Anika Pratt, and Aysegul Sahin
The Federal Reserve Bank of New York recently hosted “The Evolution of Work,” a conference that brought together thought leaders from academia, government, industry, labor, and the nonprofit sector to explore how the nature of work is evolving, including the expanding role of technology, shifts in employee work arrangements and employer-employee relationships, and the effects of these changes on workforce and community development strategies. The gathering was cosponsored by the Board of Governors of the Federal Reserve System and the Freelancers Union.
Rajashri Chakrabarti, Michael Lovenheim, and Kevin Morris
Editor’s note: The labels for “Elite private” and “Non-elite private, not-for-profit” institutions in the charts have been corrected; they were initially transposed. We regret the error. (September 12, 12:45 p.m.)
This is the final post in a four-part series examining the evolution of enrollment, student loans, graduation and default in the higher education market over the course of the past fifteen years. In the first post, we found a marked increase in enrollment of 35 percent between 2000 and 2015, led mostly by the for-profit sector—which increased enrollment by 177 percent. The second post showed that these new enrollees were quite different from the traditional enrollees. Yesterday’s post demonstrated an unprecedented increase in loan origination amounts during this period—nearly tripling between 2000 and 2015. This surge was driven most prominently by a massive increase in the number of borrowers in the public community college sector and the private for-profit college sector. Given the large increase in the borrower pool and loan originations, it is paramount to understand the consequences of these changes for the student loan default rate. This post aims to do just that. We focus on three-year cohort default rates reported by the United States Department of Education. The three-year cohort default rate is defined as the percentage of a school's borrowers who enter repayment during a particular federal fiscal year—running from October 1 to September 30—and default prior to the end of the second following fiscal year. Most federal loans enter default when payments are more than 270 days past due.
Rajashri Chakrabarti, Michael Lovenheim, and Kevin Morris
Editor’s note: The chart sources cited in this post have been corrected. (September 9, 12:55 p.m.)
In the first post in this series, we characterized the rapid transformation of the higher education market over the 2000-2015 period, a transformation that was led by explosive growth of the for-profit sector of higher education. In the second post, we found that most of this growth was driven by nontraditional students entering these institutions. Given this growth and the marked change in student composition, it is important to understand what impact these patterns might have on student loan originations, student loan volume, and the borrower pool in the various sectors of higher education. While a causal analysis is beyond the scope of this post, we instead examine descriptive patterns in these critical postsecondary outcomes. Was the growth in for-profit enrollment associated with a higher incidence of student loans? Were for-profit students, the main contributors of this growth, more or less likely to take student loans, and were they more or less likely to originate larger student loans? How about community-college borrowers, especially since community college enrollment increased noticeably over the period? This post focuses on these questions.
Rajashri Chakrabarti, Michael Lovenheim, and Kevin Morris
The higher education landscape changed drastically over the last decade and a half. This evolution was largely characterized by the unprecedented growth of the private for-profit sector. In this post, we examine whether the evolution of the higher education market was associated with changes in the types of students who attended the institutions in various sectors of the market. Was the growth in enrollment spurred by an increased entry of traditional students? Or was it driven by an inflow of nontraditional students? Has student composition in higher education changed differentially between sectors? It is important for us to understand not only the growth in the higher education market but also which types of students contributed to this growth, because any changes in the composition of students may have implications for the composition of skilled workers in the labor market, for student loans, for loan repayment, and for the labor market returns to education investments.
Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.
The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.
The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.
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