Labor Market Returns to Student Loans
81 Pages Posted: 18 May 2018 Last revised: 20 May 2020
Date Written: May 4, 2018
We study the labor market returns to a State guaranteed loan used to finance university degrees in Chile. Using a regression discontinuity design, we show that marginally eligible students forego vocational education in favor of universities but reduce their probability of graduation. Despite the fact that university loan-takers accumulate more student debt, their labor market outcomes are not different from those of ineligible students. We find suggestive evidence that the lower quality of receiving institutions accounts for these results. Finally, we extrapolate the effects away from the eligibility cutoff and show that supra-marginal students benefit from this policy.
Keywords: financial aid, higher education, student loans, labor market outcomes
JEL Classification: H52, I21, I22, I23, I26, I28, J24, J30
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