IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/12282.html
   My bibliography  Save this paper

Educational Debt Burden and Career Choice: Evidence from a Financial Aid Experiment at NYU Law School

Author

Listed:
  • Erica Field

Abstract

This paper examines the influence of educational debt aversion on the career choice of law school students, including the decision to attend law school and the decision to work in public interest law. To isolate the role of debt aversion, I analyze experimental data from NYU Law School's Innovative Financial Aid Study in which two career-contingent financial aid packages were randomly assigned to participating admits. Because the packages had equivalent monetary value and differed only in the duration of indebtedness, differences in career choices associated with financial aid assignment can be attributed to psychological debt aversion. The results indicate that debt aversion matters: In classes for which the lottery was announced prior to enrollment, participants randomly assigned to the low-debt package are nearly twice as likely to enroll. In classes without selective matriculation, lottery winners have a 36-45% higher rate of first job placement in public interest law. Both results are consistent with a simple model of debt aversion in which psychic costs of holding debt during and after school generate differences in the discounted lifetime utility of the financial aid packages and, hence, in the value of attending law school and of working in public interest law.

Suggested Citation

  • Erica Field, 2006. "Educational Debt Burden and Career Choice: Evidence from a Financial Aid Experiment at NYU Law School," NBER Working Papers 12282, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:12282
    Note: LS
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w12282.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nicholas Barr, 2004. "Higher Education Funding," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 20(2), pages 264-283, Summer.
    2. Barr, Nicholas, 2004. "Higher education funding," LSE Research Online Documents on Economics 288, London School of Economics and Political Science, LSE Library.
    3. Drazen Prelec & George Loewenstein, 1998. "The Red and the Black: Mental Accounting of Savings and Debt," Marketing Science, INFORMS, vol. 17(1), pages 4-28.
    4. Meyer, Bruce D, 1995. "Natural and Quasi-experiments in Economics," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(2), pages 151-161, April.
    5. Loewenstein, George & Thaler, Richard H, 1989. "Intertemporal Choice," Journal of Economic Perspectives, American Economic Association, vol. 3(4), pages 181-193, Fall.
    6. Cecilia Elena Rouse, 1998. "Private School Vouchers and Student Achievement: An Evaluation of the Milwaukee Parental Choice Program," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(2), pages 553-602.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Booij, Adam S. & Leuven, Edwin & Oosterbeek, Hessel, 2012. "The role of information in the take-up of student loans," Economics of Education Review, Elsevier, vol. 31(1), pages 33-44.
    2. Edwin Leuven & Hessel Oosterbeek & Bas van der Klaauw, 2010. "The Effect of Financial Rewards on Students' Achievement: Evidence from a Randomized Experiment," Journal of the European Economic Association, MIT Press, vol. 8(6), pages 1243-1265, December.
    3. Oosterbeek, Hessel & van den Broek, Anja, 2009. "An empirical analysis of borrowing behaviour of higher education students in the Netherlands," Economics of Education Review, Elsevier, vol. 28(2), pages 170-177, April.
    4. Manuel S. González Canché, 2017. "Financial Benefits of Rapid Student Loan Repayment: An Analytic Framework Employing Two Decades of Data," The ANNALS of the American Academy of Political and Social Science, , vol. 671(1), pages 154-182, May.
    5. Manuel S. González Canché, 2020. "Community College Students Who Attained a 4-Year Degree Accrued Lower Student Loan Debt than 4-Year Entrants Over 2 Decades: Is a 10 Percent Debt Accumulation Reduction Worth the Added “Risk”? If So, ," Research in Higher Education, Springer;Association for Institutional Research, vol. 61(7), pages 871-915, November.
    6. Maarten Cornet & Free Huizinga & Bert Minne & Dinand Webbink, 2006. "Successful knowledge policies," CPB Memorandum 158, CPB Netherlands Bureau for Economic Policy Analysis.
    7. Elizabeth Weber Handwerker, 2011. "Delaying Retirement to Pay for College," ILR Review, Cornell University, ILR School, vol. 64(5), pages 921-948, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Erica Field, 2002. "Educational Debt Burden and Career Choice: Evidence from a Financial Aid Experiment at NYU Law School," Working Papers 848, Princeton University, Department of Economics, Industrial Relations Section..
    2. Erica Field, 2002. "Educational Debt Burden and Career Choice: Evidence from a Financial Aid Experiment at NYU Law School," Working Papers 848, Princeton University, Department of Economics, Industrial Relations Section..
    3. Lergetporer, Philipp & Woessmann, Ludger, 2022. "Income Contingency and the Electorate's Support for Tuition," IZA Discussion Papers 14991, Institute of Labor Economics (IZA).
    4. Lergetporer, Philipp & Woessmann, Ludger, 2019. "The Political Economy of Higher Education Finance: How Information and Design Affect Public Preferences for Tuition," Rationality and Competition Discussion Paper Series 145, CRC TRR 190 Rationality and Competition.
    5. Joshua D. Angrist & Jörn-Steffen Pischke, 2010. "The Credibility Revolution in Empirical Economics: How Better Research Design Is Taking the Con out of Econometrics," Journal of Economic Perspectives, American Economic Association, vol. 24(2), pages 3-30, Spring.
    6. Bärnighausen, Till & Bloom, David E., 2009. ""Conditional scholarships" for HIV/AIDS health workers: Educating and retaining the workforce to provide antiretroviral treatment in sub-Saharan Africa," Social Science & Medicine, Elsevier, vol. 68(3), pages 544-551, February.
    7. Lergetporer, Philipp & Woessmann, Ludger, 2023. "Earnings information and public preferences for university tuition: Evidence from representative experiments," Journal of Public Economics, Elsevier, vol. 226(C).
    8. Timmermann, Dieter, 2010. "Alternativen der Hochschulfinanzierung," Arbeitspapiere 211, Hans-Böckler-Stiftung, Düsseldorf.
    9. Guillaume Allègre & Xavier Timbeau, 2016. "Les prêts à remboursement contingent dans le supérieur : plus redistributifs que l’impôt ?. Une perspective de cycle de vie," Revue économique, Presses de Sciences-Po, vol. 67(4), pages 797-820.
    10. Milkman, Katherine L. & Beshears, John, 2009. "Mental accounting and small windfalls: Evidence from an online grocer," Journal of Economic Behavior & Organization, Elsevier, vol. 71(2), pages 384-394, August.
    11. Ludger Wößmann, 2008. "Efficiency and equity of European education and training policies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 15(2), pages 199-230, April.
    12. Tim Callan & Tim Smeeding & Panos Tsakloglou, 2008. "Short-run distributional effects of public education transfers to tertiary education students in seven European countries," Education Economics, Taylor & Francis Journals, vol. 16(3), pages 275-288.
    13. Hügle, Dominik, 2021. "The decision to enrol in higher education," Discussion Papers 2021/8, Free University Berlin, School of Business & Economics.
    14. Tommaso Agasisti & Ralph Hippe & Giuseppe Munda, 2017. "Efficiency of investment in compulsory education: empirical analyses in Europe," JRC Research Reports JRC106678, Joint Research Centre.
    15. Jan Bouckaert & Bruno De Borger, 2013. "Price competition between subsidized organizations," Journal of Economics, Springer, vol. 109(2), pages 117-145, June.
    16. repec:hal:spmain:info:hdl:2441/245oodjq039dtrlsojteli5g0l is not listed on IDEAS
    17. Vandenberghe, Vincent & Debande, Olivier, 2008. "Refinancing Europe's higher education through deferred and income-contingent fees: An empirical assessmentusing Belgian, German & UK data," European Journal of Political Economy, Elsevier, vol. 24(2), pages 364-386, June.
    18. repec:hal:spmain:info:hdl:2441/1lffg6k62h8ff92pn3rthfiob7 is not listed on IDEAS
    19. O Debande & Vincent Vandenberghe, 2007. "Refinancing Europe’s Higher Education through Deferred and Income-Contingent Fees: An empirical assessment using Belgian, German and UK data," CASE Papers case124, Centre for Analysis of Social Exclusion, LSE.
    20. Findeisen, Sebastian & Sachs, Dominik, 2016. "Education and optimal dynamic taxation: The role of income-contingent student loans," Journal of Public Economics, Elsevier, vol. 138(C), pages 1-21.
    21. Guillaume Allègre, 2016. "Financement du supérieur : les étudiants ou le contribuable ?," Revue d'économie politique, Dalloz, vol. 126(1), pages 33-56.
    22. Markussen, Thomas, 2011. "Democracy, redistributive taxation and the private provision of public goods," European Journal of Political Economy, Elsevier, vol. 27(1), pages 201-213, March.

    More about this item

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:12282. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/nberrus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.