THE INFLUENCE OF LOANS IN THE COLLEGE MAJOR MARKET

Current studies regarding undergraduate major selection in United States’ universities are extensive; they focus on how various factors- such as gender, race, high school performance, and socioeconomic status- affect college major choice. Nonetheless, there is a dearth of information specifically concerning the impact of student loans on the degree selection process. The data set used was the longitudinal survey Beyond-Post Secondary (2004-2009) from the National Center for Education Statistics (NCES). It is a nationally representative sample of 16,700 students from four year public and private universities, community colleges and for-profit schools. From this, I constructed a regression logit model and estimated the average treatment effect using nearest-neighbor matching. The majors were grouped using well established standards and ranked according to average earnings. This allows for an intuitive interpretation of the estimates. The key independent variables facilitating a control group included basic demographic information in concurrence with loans, financial aid, scholarships, grants, and the total cost (room, board, and tuition) of a particular student’s university. I found that loan amounts under the twenty-fifth percentile induced students to elect majors with lower salaries, while the reverse occurred with loan amounts above the seventy-fifth percentile. The regression logit model confirmed these results.