Doctoral Dissertation Research in Economics: The Heterogeneous Effects of Student Loans

This award is funded in whole or in part under the American Rescue Plan Act of 2021 (Public Law 117-2).

Over the past 15-years, outstanding student debt in the U.S. has increased more than fivefold. This rise in student debt has led to intense political debate and a wide variety of proposed solutions, from universal free college to targeted need-based reforms. This project will examine the role of student loans in occupational choice, using novel hand-collected data on labor market outcomes by focusing on the effect of financial aid programs called Loan Reduction Programs.

The project will further explore mechanisms to understand how Loan Reduction Programs affects occupational choices and how these choices differ across the distribution of family wealth. The outcomes of the proposal will have important implications for designing student loan policies.

There is an emerging debate on student loans. While estimates for the average student can serve as an argument to increase financial aid overall, such estimates do not address the more complex and pressing problem of how best to allocate financial aid. To design better allocation policies, it is important to explore who is constrained by student debt.

The project will use staggered implementation of Loan Reduction Policies across 88 universities from 1998 to 2019 as an instrument for changes in student debt. The research will analyze whether the effect of student debt on labor outcomes differs across the student population in relation to certain demographic characteristics. The project, for example, will examine whether students from low-income families are more constrained in their labor choices, and whether these students are more likely to choose occupations that require additional human capital accumulation when they receive more financial aid.

This award reflects NSF's statutory mission and has been deemed worthy of support through evaluation using the Foundation's intellectual merit and broader impacts review criteria.