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Student loan debt, urban wage premiums drive rural brain drain

January 24, 2019

When it comes to paying off student loan debt, rural individuals who move to metro areas fare better than those who stay, according to new research from PJ Tabit and Josh Winters of the Federal Reserve Board’s Division of Consumer and Community Affairs. Using panel data from Equifax and the New York Fed, the authors explore the relationship between the student loan balances of rural millennials and where they choose to live when they begin repayment. Their analysis offers a deeper understanding of the rural brain drain phenomenon and approaches to addressing the challenge.

In ”Rural Brain Drain”: Examining Millennial Migration Patterns and Student Loan Debt, Tabit and Winters look at the changes in the census tract locations of borrowers at several points in time: when they start their credit history, when it is estimated that they enter repayment, and each of the first three years after they enter repayment. The authors find that individuals with student loan debt are considerably less likely to remain in rural areas than those without any student debt, and that those individuals with the highest student loan balances are the most likely to leave rural areas. The research revealed that students moving to metro areas are more likely to reduce their student loan balance, and are less likely to be delinquent on their student loans.

From the 1970s to the 1990s, Tabit and Winters found that net migration shifted toward rural areas due to the decline of urban manufacturing and advances in telecommunications. Since then, however, a combination of factors have contributed to a reversal of this trend. These include a sluggish economy in the early 2000’s, a lack of mobility associated with the Great Recession, turmoil with the housing market, and lost retirement savings. They also suggest that in the wake of the recession, strong urban economic growth and slower rural growth have shifted migration trends toward more populated places.

The authors conclude their report with a call for additional research on the types of community development strategies that could result in more college graduates choosing to live in rural areas. Examples include offering free land to potential residents, as seen in Marquette, Kansas; or programs that encourage doctors or lawyers to practice in rural areas, like those in Wisconsin and South Dakota.

Given the macroeconomic forces at play, it makes sense that the young and educated would pursue the economic premiums available to them in urban areas, especially if they are burdened with high levels of student loan debt.


immigration, rural