We evaluate the long-run labor market consequences of increasing student debt. Exploiting variation in the composition of college funding, we find that larger student debt burdens lead to higher initial earnings but lower subsequent returns to experience. Initial occupational choice out of college plays an important role in driving these results. We rationalize the empirical findings in a dynamic heterogeneous agent lifecycle model with endogenous schooling, occupational choice, and credit market imperfections. The model highlights the distortions to human capital and misallocation of talent that can arise from credit constraints.
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