Choosing a Career, Juggling a Loan

Using the NBER Database

by Daniel Amaral, '09

Have you ever wondered how student loans and student debt affects students’ decisions after college, or even their decisions while attending college? Loan debt affects individuals, and not just the economy at large.  Research shows that student loan debt greatly affects students, influencing what they do both in and out of college.

If you want answers to questions about student loans, debt, and students’ post-college job choices, then National Bureau of Economic Research (NBER) is a good place to start.

About loans

The classes that students select and the jobs they get upon graduation often depend on the amount of money they borrow from banks. If the money students get for college depends on what they major in, then there may be an inclination to make as much money as possible upon graduating, instead of perhaps working for lower paying, but maybe more socially beneficial, jobs.¹ Students are faced with a limited set of options because banks have their own set of risk-aversion policies to follow. A working-paper article found in the NBER database stated that “Because human capital cannot be repossessed in response to default, it makes for poor collateral,” so banks, when lending to students, will consider their future earnings (Lochner, Monge-Naranjo).

Accessing NBER

The NBER is a non-profit organization that does research in Economics. UMass Boston students have access to NBER’s articles and working papers (articles that haven’t yet been published). To access NBER’s database, select “databases and indexes,” “N,” and then “NBER” (it’s the fist choice in the list).

Accessing articles

Experiment with as many search terms and combinations as you can think of. Use the "AND," "OR," and "NOT" operators to modify results. They're especially useful if you are getting too many articles. In my case, my results ranged from 3 to about 2,000, depending on the search terms.
There was an apparent variation in yields for these similar terms. For example, searching the term "'student loan' default" yielded 3 results; "credit constraint college" yielded 904 results; "credit constraint student" yielded 254 results; "college major student loan" yielded 78 results; "student debt career yielded 43 results. In general, it's better to start with broad search terms and narrow them down. But in my case I found one article that I liked and tried to find more like it. Finding articles in a specific topic can be difficult, and it can't be expected that a particular database has what you want--and if that's the case, original research may be necessary to find what you want.

Examples

● The Nature of Credit Constraints and Human Capital
Lance J. Lochner and Alexander Monge-Naranjo
NBER Working Paper No. 13912
April 2008
JEL No. H81,I22,I28

Lochner and Monge-Naranjo show that students choose majors based on projected post-graduation incomes, which then affects everything "from purchasing homes or getting married, or assuming other responsibilities typically associated with fullfledged [sic] adulthood" (Chiteji 2007).

"Some argue that the looming need to make loan payments leads students with debt to
major in career-oriented fields or to choose more lucrative post-graduation jobs than would be otherwise optimal. They also argue that educational debt deters individuals from purchasing homes or getting married, or assuming other responsibilities typically associated with fullfledged [sic] adulthood" (Chiteji 2007).

¹“[Lance Lochner and Alexander Monge-Naranjo] show that private lenders, facing limited repayment incentives from borrowers, will also link credit limits to the level of investment, as well as observable individual characteristics that affect the returns to investment.”

●Educational Debt Burden and Career Choice: Evidence from a Financial Aid Experiment at NYU
Law School
Erica Field
NBER Working Paper No. 12282
May 2006
JEL No. I22, J24, D11, D12, H24

This article discusses how student loans affect what law school students attend, or if they'll attend law school at all. Also discussed is what areas of law new lawyers will practice, based on the amount of student loans they carry.

●The Effect of Credit Constraints on the College Drop-Out Decision: A Direct Approach Using
a New Panel Study
Todd R. Stinebrickner and Ralph Stinebrickner
NBER Working Paper No. 13340
August 2007
JEL No. I2,I21,I3,J01,J24

This article gives reasons for students not finishing college, and offers explanations alternative to student loans.

●Constrained After College: Student Loans and Early Career Occupational Choices
Jesse Rothstein and Cecilia Elena Rouse
NBER Working Paper No. 13117
May 2007
JEL No. D91,H52,I20,J24

The authors "find that debt causes graduates to choose substantially higher-salary jobs and reduces the probability that students choose low-paid 'public interest' jobs."

●These articles were helpful because they contained information that way relevant to my topic. But don't be discouraged because of low yields in search results. Oftentimes browsing through articles can generate new topics, and may even provide a greater number of results. It is important to begin with broad search terms, and then make them progressively specific. Modifying topics can be helpful, but if you aren't finding what you're looking for, then it may be necessary to try other databases.

Debt matters

The NBER has shown itself to be a useful resource in finding information on student loans and their relation to post-college work as well as what students study while attending college. If you have an Economics-related question that you're curious about, then the NBER is a good place to turn. So far, I seem to have generated more questions than answers. But questions such as  these are important, as they can lead to answers, such as ways the government can improve access to higher education, and create incentives for low-paying, but important social work--work that all of society can benefit from.

Student loans aren't targeted toward the rich, but the poor. Though, these articles show that students from poor families could be so burdened with student loan debt that they won't be able to to serve their own community, the community that gave them the work ethic, the drive, to get to college in the first place. The research shows that these students are likely to find themselves in the private sector, paying off their loans, far away from their roots, far away from doing something that's actually useful.