Israeli university and college students are fortunate. Their annual tuition is less than the equivalent of $4,000, and bachelor’s degrees can be complete in three years. They usually don’t have to take out student loans. Tuition is uniform in public institutions (which comprise the vast majority of institutions of higher learning and set by the government. 

But Israeli young adults have burdens. Housing (including dormitory) and food costs are quite high, and as most of them have already served in the Israel army for two to three years, they are older than in the US and some are already married and have families. 

Tuition, housing and food costs can reach tens of thousands – or even more dollars a year in the US, where four years are needed for a bachelor of arts degree and many more for medical or law school at the graduate level, especially at the most prestigious institutions. 

A study by Tel Aviv University (TAU) researchers along with American colleagues from The study was conducted jointly by researchers from Cornell University (New York), the University of Texas, Auburn University (Alabama) and the University of Florida about the burden of student loans in the US has been published in the Journal of Applied Psychology. 

The study indicates that college graduates who must pay back substantial student loans experience mental stress that reduces their ability to secure fulltime employment after graduation. The study indicates that college graduates who must pay back substantial student loans experience mental stress that reduces their ability to secure fulltime employment.

A new study led by Prof. Peter Bamberger of TAU’s Coller School of Management found that nearly half (48%) of the graduates of four major American universities find it difficult to secure fulltime employment after graduation, largely due to the burden of student loans.

The researchers discovered that the anxiety about the need to pay back tens of thousands of dollars negatively impact the efforts of graduating students to enter the workforce.  Such stress may be shown by a lack of concentration during job interviews, lack of follow-up on potential job leads, or preferring odd jobs over a methodical search for the right job.

To investigate the financial pressure experienced by alumni, the researchers focused on students during their final semester in their fourth (senior) year at college, following up with them through the first month after graduation – the period in which many US graduates are in touch with potential employers about potential jobs that fit their qualifications. The findings indicate that only 52% of the new graduates began to work full time (35 hours per week or more) immediately following graduation.

Bamberger said that his team had a hypothesis – that financial pressure associated with student loans may have two opposite effects –

a positive effect of extra motivation to find a well-paying job and work to pay off the debt; or a negative effect, when the financial pressure generates mental stress that is detrimental to the demanding task of seeking employment.

The study included 1,248 undergraduates with an average student loan debt of about $28,000 who answered a range of questions: how much they owe, the financial pressure they experience, the stress they feel with regard to the job search process, how many hours they work per week during their last semester in college and their employment status upon graduation.

The findings indicate a direct correlation between the amount of debt and the level of financial pressure that lead to mental stress – which in turn negatively impacted the effectiveness of the job search. The greater the stress, the lower the chances of securing fulltime employment upon graduation – a situation that may (according to previous studies) be detrimental to the individual’s earning potential in the future. The possible positive effect of increased motivation due to financial pressure was found to be marginal at best. 

Bamberger concluded that their findings havd several practical implications. “First, students seeking employment should take active steps to reduce the stress they feel and conduct a methodical job search with long-term benefits instead of looking for fast, easily available employment. Universities, on their part, should initiate stress management and job search workshops, as well as financial planning programs, to help their students enter the workforce in a more advantageous manner.”