Macroeconomic Implications of Student Debt: A State-Level Analysis

Using state-level data for the 2003-2019 period, we show that the rise in outstanding student debt in the United States has contributed to lower consumption growth in the medium run. The estimated effects are larger when we use an instrumental variable approach identifying the hypothetical impact of an increase in student debt without an associated increase in educational attainment. This approach exploits variations in state appropriations for higher education, federal student loan limits, and interest rates on federal loans. We also find suggestive evidence that expansions in student loans lead to subsequent increases in credit card debt.