Read on TwitterWhat happens when students have access to more student loans?
They borrow more, complete more degrees, earn more later in life, and repay their loans more
https://www.nber.org/papers/w27658 ">https://www.nber.org/papers/w2...
New Working paperhttps://abs.twimg.com/emoji/v2/... draggable="false" alt="🚨" title="Polizeiautos mit drehendem Licht" aria-label="Emoji: Polizeiautos mit drehendem Licht"> with @Econ_Sandy @lisajdettling @sarena_goodman and Lesley TurnerWhat happens when students have access to more student loans?They borrow more, complete more degrees, earn more later in life, and repay their loans more https://www.nber.org/papers/w2..." title="https://abs.twimg.com/emoji/v2/... draggable="false" alt="🚨" title="Polizeiautos mit drehendem Licht" aria-label="Emoji: Polizeiautos mit drehendem Licht">New Working paperhttps://abs.twimg.com/emoji/v2/... draggable="false" alt="🚨" title="Polizeiautos mit drehendem Licht" aria-label="Emoji: Polizeiautos mit drehendem Licht"> with @Econ_Sandy @lisajdettling @sarena_goodman and Lesley TurnerWhat happens when students have access to more student loans?They borrow more, complete more degrees, earn more later in life, and repay their loans more https://www.nber.org/papers/w2..." class="img-responsive" style="max-width:100%;"/>
There is a lot of student debt in the US (~1.5$ trillion). But we don& #39;t have a lot of evidence on the causal effect of loans on student outcomes.
It& #39;s very hard to find a good counterfactual for borrowers because loan access is nearly universal.
It& #39;s very hard to find a good counterfactual for borrowers because loan access is nearly universal.
We use the expansion of borrowing limits that occurred in 2008 and 2009. This mean that depending on when students entered school they had access to very different amounts of loans.
We compare students who borrowed the max in their first year (constrained) to students who borrowed but less than the max before and after the policy changes.
The policy resulted in increased borrowing for constrained students of nearly 1,900 for 4yr students.
The policy resulted in increased borrowing for constrained students of nearly 1,900 for 4yr students.
We use data from all public 4yr and 2yr schools in Texas including their attendance, graduation, and earnings.
We also use a nationally representative sample of borrowers for whom we have credit outcomes such as repayment, mortgage, credit card balance, etc.
We also use a nationally representative sample of borrowers for whom we have credit outcomes such as repayment, mortgage, credit card balance, etc.
We find that increased borrowing increases student credits attempted and enrollment. Ultimately leading to constrained students at 4yr schools increasing graduation by about 5 percentage points.
Additional borrowing leads to students being less likely to have a credit card, having lower credit card balances, and to be employed less during college.
Student earnings increase 6-8 years after school entry (after students have likely graduated)
Student earnings increase 6-8 years after school entry (after students have likely graduated)
Students are also less likely to be delinquent/default on their student loans. This on its own would be kind of surprising but makes sense because students are earning more $.
We also find no negative effects on the probability of having a mortgage
We also find no negative effects on the probability of having a mortgage
We find smaller results at community colleges, but have worse initial trends for some outcomes.
These estimates are for students who are enrolled in college. Student loan offers could have different effects for students considering attending college.
These estimates are for students who are enrolled in college. Student loan offers could have different effects for students considering attending college.
Our education results may not apply to the for profit sector.
However, our credit results should be representative of borrowers more generally since we do not condition (or observe) type of institution.
However, our credit results should be representative of borrowers more generally since we do not condition (or observe) type of institution.
Our results are consistent with a classic credit constraints story. Students want to make productive investments in college but lack the $ to do so.
This paper is also part of a broader set of papers showing $ can help students complete college.
This paper is also part of a broader set of papers showing $ can help students complete college.
I have been wanting to write a paper like this for a while--student loans are important but are hard to study.
Thanks to @Econ_Sandy @sarena_goodman @lisajdettling and Lesley!
Thanks to @Econ_Sandy @sarena_goodman @lisajdettling and Lesley!
