Essays on the Economics of Student Loans and Economic Demography

Abstract

This dissertation studies causes of key human capital outcomes in the United States. Beginning with education, I examine how the student loan repayment plan structure changes borrowers' behavior, plausibly affecting both major and occupational selection. In health, I examine how the opioid epidemic led to more deaths than suggested by overdoses alone, but caution that methods leveraging geographic variation to identify the total impact of opioids should be exercised with attention paid modelling assumptions.

Driven by concerns over borrowers' ability to repay student loans, policymakers in the United States have turned to Income Driven Repayment (IDR) plans to offer flexible terms of repayment. Chapter I examines borrowers’ educational investments when an IDR plan becomes a viable alternative. I construct a model of borrower behavior, highlighting the central role of repayment plan structure in students’ optimal decision-making. I link academic records from a major public university to consumer credit bureau data to assess the empirical evidence for shifting major selection. After an expansion in IDR policies, male borrowers are more likely to select majors with worse initial labor market outcomes but higher wage growth, consistent with theoretical predictions: selecting majors associated with 3.2%-4.7% higher poverty rates but also 4%-5.7% higher earnings growth during their early career. Given proposed expansions to IDRs, this is relevant to understand how students’ educational investments will respond.

Chapter II turns to the labor market, examining a directed search model with educational investment and loans. Repayment plans alter search behavior: under Fixed Repayment, higher payments push high ability people into higher-wage submarkets whereas lower ability people move to lower-wage jobs. These heterogeneous responses mirror two strands of current literature within one model. Under an IDR plan, individuals search in higher wage submarkets relative to the no-loan case, with the difference depending plan parameters, including time remaining in repayment, the income disregard, and limits on maximum repayments. As in existing literature, under a graduate tax, search behavior coincides with the no-loan case. However, this is true if borrowers cannot save. By introducing features more common to IDR plans or allowing saving, this no longer holds. I outline conditions on efficient loans, which mitigate differences in search behavior between borrowers and non-borrowers and encourage optimal college attendance.

With John Bound, Timothy A. Waidmann, and Arline T. Geronimus, Chapter III examines how opioid use in the United States increased other-cause mortality. In recent decades, life expectancy among U.S. adults stagnated or fell. Dramatic increases in drug and alcohol-related deaths, especially opioid overdoses, have been identified as a key driver of those trends. Estimating the total contribution of opioid use to population mortality using standard demographic techniques assumes independence between competing risks. Alternative methods have been developed that rely on spatiotemporal correlations among causes of death to identify the total impact of specific behaviors. However, these methods require assumptions about causal pathways. We relax several of these assumptions by introducing economic distress as a potential common driver of opioid use and other types of mortality and disaggregate mortality trends by time and type of opioid involved. We find evidence that correlations driven by economic conditions affect prior estimates of opioids’ total impact on mortality and sensitivity to time period and type of drug studied, substantially overstating recent contributions of opioid use to life expectancy trends.