Does studying economics in college influence loan decisions later in life?

ABSTRACT

The authors investigate the relationship between undergraduate economics coursework or majoring in economics and the debt behavior of the college graduates. The data come from the Baccalaureate and Beyond (B&B) longitudinal survey of the National Center for Education Statistics. College graduates who took courses in undergraduate economics or majored in the subject appear less willing to assume debt through auto loans or federal student loans. If they do assume debt, the amount of the monthly payment (auto loans) or the total amount owed (student loans) is less for college graduates with economics coursework or an economics major compared with other students. The findings are robust for college graduates one year and four years after graduation.

KEYWORDS:

• auto loans
• borrowing or debt behavior
• economics courses
• economics majors
• student loans

JEL CODES:

• A22
• D14
• I21

Acknowledgments

Previous versions of this article were presented at the American Economic Association Committee on Economic Education's Conference on Teaching and Research in Economic Education (CTREE) in June 2017 (Denver) and the Developments in Economics Education conference in September 2017 (London). The authors greatly appreciate the comments received from the participants at these sessions.

Notes

1. Four years is used to describe the period for the second follow-up survey because at least four years had passed since graduation from an undergraduate institution. For some respondents, however, the survey was not completed or received until 4.5 years, or even 5 years, later.

2. Data were available on the occupation of college graduates, but this variable was omitted from the specification and estimation because when it was included it made no contribution and showed no significant differences across occupations. The income and employment security variable appears to capture the key elements related to employment and activity after graduation.

3. The coefficient results from the auto loan analysis also are about the same, although the change in the sample size increases the standard error and reduces significance of the variables.

4. No data were available on variables that could be used as alternative, but similar, dependent variables to re-run the auto loan analysis as was possible with the student loan analysis.