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Tuition, Debt, and Human Capital

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Abstract

This paper investigates the effects of college tuition on student debt and human capital accumulation. We exploit data from a random sample of undergraduate students in the United States and implement a research design that instruments for tuition with relatively large changes to the tuition of students who enrolled at the same school in different cohorts. We find that $10,000 in higher tuition causally reduces the probability of graduating with a graduate degree by 6.2 percentage points and increases student debt by $2,961. Higher tuition also reduces the probability of obtaining an undergraduate degree among poorer, credit-constrained students. Thus, the relatively large increases in the price of education in the United States in the past decade can affect the accumulation of human capital.

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  • Rajashri Chakrabarti & Vyacheslav Fos & Andres Liberman & Constantine Yannelis, 2020. "Tuition, Debt, and Human Capital," Staff Reports 912, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:87439
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    Cited by:

    1. Azmat Ghazala & Simion Ştefania, 2021. "Charging for Higher Education: Estimating the Impact on Inequality and Student Outcomes," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 21(1), pages 175-239, January.
    2. Sandra E. Black & Jeffrey T. Denning & Lisa J. Dettling & Sarena Goodman & Lesley J. Turner, 2023. "Taking It to the Limit: Effects of Increased Student Loan Availability on Attainment, Earnings, and Financial Well-Being," American Economic Review, American Economic Association, vol. 113(12), pages 3357-3400, December.
    3. Lisa J. Dettling & Sarena Goodman & Sarah Reber, 2022. "Saving and Wealth Accumulation among Student Loan Borrowers: Implications for Retirement Preparedness," Finance and Economics Discussion Series 2022-019, Board of Governors of the Federal Reserve System (U.S.).

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    More about this item

    Keywords

    human capital; credit constraints; tuition; student debt;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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