The Long-Run Impact of the Great Recession on Student Debt

This paper investigates the effect of local labor market shocks during the Great Recessionon subsequent student debt-related outcomes for a panel of 1 million student loan borrowers between the ages 17 and 34 in 2009, following that cohort for the subsequent 10 years.We find that the Great Recession significantly increased student indebtedness, delinquencyand default on student debt, and other forms of non-repayment of student loans. The GreatRecession’s effect on student indebtedness amplifies throughout the length of the panel,through 2019. A one-percentage-point-larger increase in the local unemployment rate be-tween 2007 and 2009 corresponds to a $812.20-larger change in outstanding student debt in2019, relative to a 2009 baseline loan balance. We interpret these findings as evidence thatstudent indebtedness and associated non-repayment is an effect of prolonged labor marketslackness and credentialization