Natural Disasters, Financial Shocks, and Human Capital

We examine effects on productivity, employment, and debt outcomes among college students whose parents reside in areas that experience financial shocks caused by natural disasters. After shocks, treated students exhibit poorer academic performance. To boost the impaired grade point average, these students sacrifice educational content by withdrawing from more courses and enrolling in fewer STEM (Science, Technology, Engineering, Mathematics) courses. Effects are stronger for middle class students likely relying on family income to pay for college. Students mostly mitigate financial shocks with additional part-time employment. Ultimately, disrupted students are 10% more likely to default on student loans. Overall, these results shed light on the effects of financial stress on the intensive margin of human capital formation. This paper was accepted by Camelia Kuhnen, finance. Supplemental Material: The online appendices and data files are available at https://doi.org/10.1287/mnsc.2022.02977 .