We develop an infinite-horizon dynamic search model to understand education-job mismatches in the labor markets where job seekers face three different types of labor markets based on their minimum educational requirements. Using a new data set, we find that our model matches the U.S. data well when we introduce heterogeneity through wage distributions. We find that regardless of the general unemployment level, education-job mismatches can exist due to the dynamics within the job markets. Highly educated job seekers may settle for jobs below their education level due to the frictions in the job market even when the unemployment is low, leading to a high degree of over education in the labor market and crowding out job seekers who have lower level of education. This means many jobs could be filled by overqualified candidates leading to possible inefficiencies in the economy. We use counterfactual experiments to show that even when the general unemployment level is kept constant, if the conditions within different job market types change, over education levels may increase or decrease dramatically.