NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

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

Erica Field

NBER Working Paper No. 12282
Issued in June 2006
NBER Program(s):   LS

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.

download in pdf format
   (207 K)

email paper

This paper is available as PDF (207 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w12282

Published: Erica Field, 2009. "Educational Debt Burden and Career Choice: Evidence from a Financial Aid Experiment at NYU Law School," American Economic Journal: Applied Economics, American Economic Association, vol. 1(1), pages 1-21, January.

Users who downloaded this paper also downloaded these:
Rothstein and Rouse w13117 Constrained After College: Student Loans and Early Career Occupational Choices
Ehrenberg w2602 An Economic Analysis of the Market for Law School Students
Avery and Hoxby w9482 Do and Should Financial Aid Packages Affect Students' College Choices?
Cellini and Goldin w17827 Does Federal Student Aid Raise Tuition? New Evidence on For-Profit Colleges
Kane w9703 A Quasi-Experimental Estimate of the Impact of Financial Aid on College-Going
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us