The Academy of Financial Services 35th Annual Meeting

Student loans, correlated random effects

The theory of human capital (Becker, 1973) states that individuals will invest in an additional unit of human capital as long as the marginal benefit of that unit is greater than or equal to its marginal cost. Student loans provide opportunity for individual to enroll in higher education, which yields greater human capital, but with greater debt burden. Previous reserach shows that educational attainment, which can be achieved with student loans, is associated positively with life satisfaction (Kim and Chatterjee, 2019; Salinas-Jimenez, 2013). Therefore, the goal of this paper is to distinguish whether the positive association of education or the negative association of debt is the dominant effect on short term life satisfaction.