New research finds student loan debt hinders students’ chances at securing a full-time job upon graduation

GAINESVILLE, Fla. – In 2020, student loan debt in the United States hit a record high of $1.56 trillion. With the average student loan debt at almost $33,000, it’s no surprise that previous studies have found there are significant long-term consequences of student loan debt, like delaying the transition to adulthood and homeownership.

In order to curb the crushing feeling student loan debt brings, many students focus their efforts on finding a well-paying job after graduation. However, having student loan debt might make finding a job even more challenging, according to new research.

Drawing on conservation of resource theory, Lanzillotti-McKethan Eminent Scholar Chair Mo Wang of the UF Warrington College of Business, Ariane Froidevaux of the University of Texas at Arlington, Jaclyn Koopmann of Auburn University and Peter Bamberger of Tel Aviv University, argue that having student loan debt is a financial stressor to students during their job search, which in turn can harm their chances of securing a full-time job.

“In particular, student loan debt creates an anticipated loss of (financial) resources, which ought to elicit higher levels of finance-related distress to job seekers,” the researchers write. “The more financially strained individuals are, the less likely they are to have sufficient resources to adequately invest into job search to achieve successful outcomes.”

To test this theory, the researchers used data from more than 1,200 graduating seniors from four different U.S.-based universities in their paper, “Is student loan debt good or bad for full-time employment upon graduation from college?” While they found that financial strain from student loan debt did indeed cause students to have a harder time securing a full-time job, they also found that college students who work while in school to combat financial strain were able to enhance their employability and ultimately the likelihood of getting a full-time job.

“Increasing work hours in college may be a way for financially strained students to achieve immediate financial resource gains and alleviate their financial strain,” the researchers write.

There are more than just financial benefits to working while in school, the researchers find.

“Work experience is likely to expose individuals to work-specific knowledge and skills…As such, the more work experience gained during college, the more likely that graduating students will be viewed by hiring organizations as having potential to be productive on the job,” Froidevaux, Koopmann, Wang and Bamberger write.

The researchers suggest a few things students who are feeling the financial strain of loan debt can do to ease the burden. Students first need to recognize that loan debt will likely take a toll on their quest to secure a job after graduating.

“As loan debt is not avoidable for some students, it is advisable that students take steps to reduce the psychological pressure that may result from such debt,” the researchers write.

Additionally, as the research suggests, students should consider working during their time in school or during school breaks to boost their employability.

Froidevaux, Koopmann, Wang and Bamberger suggest that students aren’t the only ones who can take steps to ease the burden of loan debt.

“University career development offices should consider adopting job search interventions aimed at improving stress management and financial planning…[and] organizations can support their new employees by implementing human resource policies, such as student loan repayment assistance,” the researchers write.

This research is forthcoming in Journal of Applied Psychology.