General Seminar - Ana Gamarra Rondinel

The Long Shadow of Student Debt: Labour-Market Consequences under Australia's Income-Contingent Loan System

This paper examines whether the level of accumulated student debt affects graduates’ labour-market outcomes under an income-contingent loan system. We use a 10% longitudinal sample of Australian tax filers linked to administrative loan records for 1991–2020. Accumulated bachelor’s debt is instrumented with the real tuition fees students faced at entry, which vary across cohorts and fields of study because of the 1997 and 2005 tuition reforms. We estimate an elasticity of labour income with respect to debt of approximately −0.4 that persists over the first post-graduation decade. Higher debt also increases transfer receipt and low-wage employment in early years and reduces self-employment. It has no effect on occupational, employer or geographic mobility. Incomes bunch at the first repayment threshold, and total and taxable income are more responsive to debt than labour income. Both findings are consistent with strategic income reporting to delay repayment, alongside hardship and insurance-based explanations.