College student loan debt and income inequality in the US: national and regional evidence

Abstract

PurposeThis study explores the role of rising US student loan debt in explaining income inequality.Design/methodology/approachThe study uses the autoregressive distributed lag (ARDL) modeling approach to explore the short- and long-run impact of college debt on income inequality in the US through quarterly data over the period 2000–2019.FindingsThe results demonstrate the detrimental impact of student debt on national and regional income inequality. Moreover, the regional analysis highlights a more pronounced impact of student debt on income distribution in South and West regions. The findings document that these regions, with the lower student debt proportions, have the lowest average cost of attending college. Finally, the analysis explores two potential channels – i.e. race and homeownership – that could explain the link between college student debt and income inequality.Practical implicationsThe results can be helpful for policymakers and researchers to formulate practical approaches for assessing and addressing the rising national student debt and income inequality.Originality/valueThis is the first, to the best of the author's knowledge, study that explores the impact of US college debt on income inequality.