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Monday, January 21, 2019

'Brain drain' from rural areas is driven by need for higher wages to pay off student loans, Federal Reserve finds

The "brain drain" of young people from rural areas is driven partly by higher wages in urban areas, according to research from the Federal Reserve System of banks. "College students from rural areas are moving to big cities for higher wages to help pay off their student loans," Kaveh Waddell reports for Axios.

"In the past, experts have explained this dynamic as a lifestyle choice. But in its new analysis, the Fed points to student loans as an additional factor in the gravitational pull away from rural areas," Waddell writes. "Researchers studied student borrowers, following their path across America for several years after they started paying back their loans." Their findings included:
  • About half of rural residents who took out student loans still lived in a rural area six years later, compared to two-thirds who had not taken out loans.
  • People with the most debt — those in the highest quartile of loan balances — were most likely to leave.
  • Those who did move to cities did better financially. They were employed at higher rates and earned considerably higher wages, even when accounting for more expensive living.
"This pattern was on hold during the 2000s, but has taken off post-recession, the analysis said." Much research has shown that rural areas have lagged behind metro areas in job growth since the recession, only recently reaching pre-recession employment levels. Meanwhile, rural population declined in five years after the recession.

"With 70 percent of today’s graduates borrowing an average of more than $25,000, it’s no question that college graduates are forced to live in expensive urban areas, because they have the highest concentration of high-paying jobs," David Chang, CEO of Gradifi, which consults for companies on their student-loan repayment programs, told Axios. "While these urban areas offer tremendous opportunities, these come at significant costs. The metro areas that are drawing the most recent graduates are among the most expensive in the country, which is also a challenge for those grappling with student-loan payments."

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