Rural America’s ‘Brain Drain’: How Student Debt Is Draining Small Towns

Rural America is no longer where many young college graduates want to settle, with some fleeing to urban centers like New York or San Francisco. Aside from the glamor of living in these places, there may be another culprit for the rural “brain drain” happening in the United States: student loan debt.

Adults with student loans are less likely to stay in rural areas than those without, and adults with the highest student loan balances are most likely to migrate to cities, according to new search of the Federal Reserve. This contributes to a growing gap in college achievement between urban and rural America, which diverged from about 5 percentage points in 1970 to 14 percentage points in 2016.

As fewer young people with a college education stay in rural areas, these areas become less attractive to other young graduates. Employers, for their part, are increasingly relying on urban areas to recruit these workers. Added to this is the pressure of the country’s growing student debt, which is putting increased pressure on graduates to seek better-paying jobs – which are more plentiful in cities.

“Right now, we’re experiencing the largest rural-urban opportunity gap in history,” said Matt Dunne, founder of the Hartland, Vermont Rural Innovation Center, who works at the creation of rural “innovation centres” to develop entrepreneurship. . “People think the only place you can have ambitious work is to cram into already overcrowded cities facing housing crises rather than shoving your way into rural areas.”

“It creates a self-fulfilling prophecy,” said Dunne, who worked for Google from a remote office in Vermont before starting the Center on Rural Innovation.

The Problem of Student Debt in Rural America

Rural America is getting older, its population shrinking, and falling behind in its share of educated residents. About 19% of rural residents had university degrees in 2016, compared to 33% of urban residents, a gap that has widened in recent decades, according to the Ministry of Agriculture. noted Last year.

Admittedly, the Federal Reserve said it couldn’t determine whether student loan debt was driving young college graduates to move to cities. Nonetheless, the trend is notable: about half of rural residents who took out student loans remained in those areas six years later, compared to two-thirds of rural residents who did not take out loans. And graduates with the most debt were the most likely to leave, they found.

There’s a good reason young workers with student loans would head to the big city. Cumulative job growth since 2009 – after the recession ended – jumped nearly 14% in cities with at least 1 million people, compared to 2.7% for rural areas and small towns , according to Goldman Sachs.

City wages

Workers with a university degree earn much more in large cities, around $71,000 a year. But if they stay in rural areas, those graduates earn about $50,000 a year, Goldman found.

Unsurprisingly, college graduates with debt had better financial outcomes than those who stayed in rural areas, the Fed found. These big-city migrants are more likely to repay their loans, less likely to default, and are more likely to become homeowners, they said.

The lure of higher pay and broader job opportunities is appealing — and hard to compete for rural communities, Dunne noted.

“The general rhythm is that you have to go to urban areas, especially tech hubs, to get a job in the new economy,” he said. “It speeds up movement to cities and investment cycles in companies that start in cities. There’s an idea that you can’t find talent in rural areas or small towns.”

A Divided America?

The trend is worsening economic outcomes for rural residents while making resources — like housing — scarcer and more expensive in big cities, economists and policy experts say. It is also blamed for widening the political gap between rural areas and large coastal cities.

“Any time you see massive separation by demographics, that’s not healthy,” Dunne said. “You want to have a diversity of skills, education and perspective in any part of the country.”

In many cases, Americans who live in large cities would welcome the opportunity to move to a rural area, but may perceive smaller areas as lacking in job opportunities. Nearly one in four city dwellers say they would like to move to another community, and a third say they would like to find a rural community to live in, Pew found in a 2018 study.

loan forgiveness

Dunne, who credits his own lack of student loans with allowing him to return to Vermont to start his career, said he made a proposal in the state’s last legislative session to create a program that would forgive up to $20,000 in student debt over two years for college graduates who bought homes in rural parts of the state.

“The benefit would not only encourage young people to turn to rural areas to live, work and raise a family, but it would improve their financial profile in order to obtain a bank loan,” he said, adding that he was inspired by companies that offer loan forgiveness incentives when hiring, which they have found to be effective recruiting tools.

Other communities have developed similar programs, such as Marquette, Kansas, which offers free land to people who agree to build a house in the rural commune. And there are also loan relief programs for medical professionals such as nurses who agree to work in rural areas.

“Everything has to be on the table to meet this challenge,” Dunne said.