Research on social stratification and the distribution of resources has traditionally focused on two concepts: income inequality and wealth inequality. Income inequality refers to a stratified distribution of income, such as wages received for labor. Wealth inequality refers to the stratified distribution of wealth, including financial assets from equities to real estate. Income inequality is thought to top-heavy, and vary periodically in response to market shocks and political pressures, while wealth is thought to be even more top-heavy, and passed through generations in such a way that ensures an unchanging distribution. Generally speaking, wealth inequality is thought to be much more important than income inequality in terms of securing a more equitable distribution of resources, although Piketty notes that financial returns on wealth are relatively low right now, which might be the reason why income inequality is increasing – as wealth pays less, the rich are forced to pay themselves higher amounts in income in order to maintain their relative position.
Debt is rarely discussed in sociology, and has served as a monkey wrench in many analyses of wealth and income distributions because it can signal both increased earnings potential, as well as an over-reliance on debt that could potentially lead to financial disaster. Nowhere is this dual nature more evident than in the case of student loans. Going to college can result in a lifetime of increased earnings, but paying for it on credit can also result in decades of loan payments. College tuition and reliance on lending has skyrocketed since the turn of the century, resulting in a cohort of students so indebted that writers have begun terming them as “generation debt.” Loan maintenance carries with it a guarantee of decreased income (as payments must be made), and with such a degree of reduced income it is entirely plausible that the rate of wealth accumulation for this cohort might be decreased to a degree that aggravates the distribution of wealth to even more inequitable levels.
Therefore, my analysis proposes studying the effects of student debt load on wealth accumulation for students who borrow. This analysis is necessarily divided into three populations of interest: those who accumulated student loans but didn’t graduate (who are expected to possess the least wealth), students who accumulated student loans and did graduate, and, finally, both groups together to determine the net effect of student loans on wealth accumulation. This will be achieved through secondary data analysis, drawing upon the National Longitudinal Youth Survey’s 1997 cohort, and the follow-ups later conducted of this cohort. This cohort is ideal for the study because they would be starting college in the same time period that student lending truly began to explode in magnitude, so their experiences will likely be similar to the generations that followed them. Analysis will be performed through the use of a regression analysis – included in this regression will be factors previously identified as being significant to wealth accumulation rates, such as race, age and parental income. The inclusion of these variables will improve the internal validity of the study, as exclusion of them might lead to the identification of spurious relationships.