Dominique Baker, Assistant Professor of Education Policy, Southern Methodist University

Borrowing to Get Ahead: Undergraduate Debt’s Effect on Graduate School Decision-Making

Though accumulating undergraduate debt to support earning an undergraduate degree is often a rational choice, some students may view this debt as a deterrent to attending graduate school. In this paper, Baker used instrumental variables to estimate the causal effect of undergraduate debt on graduate school aspirations and enrollment using student-level data from two nationally representative longitudinal datasets merged with institutional characteristics of the institutions they attended. She found no evidence of an effect of undergraduate debt on graduate school aspirations. However, she found that a student borrowing $5,000 more in total undergraduate debt decreased her likelihood of enrolling in graduate school by approximately 2%. An equivalent increase in the student’s federal undergraduate debt decreased her likelihood by approximately 3%. Findings were robust to the inclusion of state fixed effects to control for state economic and educational context. Results suggest that interventions aimed at lessening the influence of undergraduate debt on bachelor’s degree earners pursuit of graduate school should focus on actual enrollment behavior instead of aspirations.