Taking It to the Limit: Effects of Increased Student Loan Availability on Attainment, Earnings, and Financial Well-Being
Growing reliance on student loans and repayment difficulties have raised concerns of a student debt crisis in the United States. However, little is known about the effects of student borrowing on human capital and long-run financial well-being. We use variation induced by recent expansions in federal loan limits, together with administrative schooling, earnings, and credit records, to identify the effects of increased student borrowing on credit-constrained students’ educational attainment, earnings, debt, and loan repayment. Increased student loan availability raises student debt and improves degree completion, later-life earnings, and student loan repayment while having no effect on homeownership or other types of debt.
Any views or interpretations expressed in this paper are those of the authors and do not necessarily reflect the views, opinion, or official position of the Federal Reserve Board of Governors. The conclusions of this research do not necessarily reflect the opinion or official position of the Texas Education Research Center, the Texas Education Agency, the Texas Higher Education Coordinating Board, the Texas Workforce Commission, or the State of Texas. We thank Andrew Barr, Judy Scott-Clayton, Jasmine Santana and seminar participants at Brigham Young University, Duke University, Vanderbilt University, SOLE/EALE/AASLE 2020 World Conference, E-con of Education virtual seminar, the Association for Education Finance and Policy 2020 annual meeting, the National Tax Association 2019 annual meeting, and the Western Economic Association International 2019 conference for helpful comments and suggestions. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Lesley J. Turner
During the 2018-19 academic year, I received a fellowship ($112,140) from the Center for Bipartisan Policy, through a grant from the Laura and John Arnold Foundation, to work with the Senate Health, Education, Labor, and Pensions (HELP) Committee on issues related to higher education reform.