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

Erica Field
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Erica Field: Princeton University

No 848, Working Papers from Princeton University, Department of Economics, Industrial Relations Section.

Abstract: This paper explores how the timing of career-contingent financial aid influences its effectiveness in encouraging law students to enter public interest work, and hence the isolated effect of educational debt timing on career choice. I analyze quasi-experimental data from NYU Law School's Innovative Financial Aid Study, in which careercontingent financial aid packages with equivalent net values but varying debt structures were randomly assigned to applicants. My results indicate that debt timing matters: law school graduates who receive tuition waivers rather than ex-post loan assistance have a 32% higher rate of first job placement in public interest law and a 91% higher rate of clerkships. Furthermore, recipients of tuition waivers are more likely to enroll in law school conditional on being admitted. Using propensity score methods to correct for sample selection bias at the matriculation stage, I find that differences in first job placement according to debt timing persist after controlling for differential enrollment rates, implying an independent post-enrollment influence of debt timing on career decisions. I present a behavioral model that rationalizes the time-inconsistency of career decisions when agents are both debt averse and loss averse.

Keywords: educational finance; occupational choice; consumer economics (search for similar items in EconPapers)
JEL-codes: P30 P31 P32 P33 P34 (search for similar items in EconPapers)
Date: 2002-10
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Citations: View citations in EconPapers (1)

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