"The impact of Student Loans and Education on Labor Outcomes: Vocational Education vs College"

Students scoring above certain thresholds in the college admission test are eligible for education loans and free scholarships in Chile. Given the random variation in college enrollment and the amount of debt induced by these cutoff rules, we use a regression discontinuity design to identify the marginal returns of vocational education versus college education and the impact of debt burden on educational choices and labor outcomes. We use individual-level data on educational background and labor history for the universe of test takers in 2007. We find no differences in earnings, employment, or participation in the formal sector caused by either program. Given the more expensive tuition fees, more years of instruction, and lower probability of graduation, the students induced to enroll in college have suffered from high-income losses in the margin.