Advanced Search
MyIDEAS: Login

Student Loans: Do College Students Borrow Too Much--Or Not Enough?

Contents:

Author Info

  • Christopher Avery
  • Sarah Turner
Registered author(s):

    Abstract

    Total student loan debt rose to over $800 billion in June 2010, overtaking total credit card debt outstanding for the first time. By the time this article sees print, the continually updated Student Loan Debt Clock will show an accumulated total of roughly $1 trillion. Borrowing to finance educational expenditures has been increasing—more than quadrupling in real dollars since the early 1990s. The sheer magnitude of these figures has led to increased public commentary on the level of student borrowing. We move the discussion of student loans away from anecdote by establishing a framework for considering the use of student loans in the optimal financing of collegiate investments. From a financial perspective, enrolling in college is equivalent to signing up for a lottery with large expected gains—indeed, the figures presented here suggest that college is, on average, a better investment today than it was a generation ago—but it is also a lottery with significant probabilities of both larger positive, and smaller or even negative, returns. We look to available—albeit limited—evidence to assess which types of students are likely to be borrowing too much or too little.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.26.1.165
    Download Restriction: no

    File URL: http://www.aeaweb.org/jep/app/2601_Avery_Turner_app.pdf
    Download Restriction: no

    Bibliographic Info

    Article provided by American Economic Association in its journal Journal of Economic Perspectives.

    Volume (Year): 26 (2012)
    Issue (Month): 1 (Winter)
    Pages: 165-92

    as in new window
    Handle: RePEc:aea:jecper:v:26:y:2012:i:1:p:165-92

    Note: DOI: 10.1257/jep.26.1.165
    Contact details of provider:
    Email:
    Web page: http://www.aeaweb.org/jep/
    More information through EDIRC

    Order Information:
    Web: http://www.aeaweb.org/subscribe.html

    Related research

    Keywords:

    Find related papers by JEL classification:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Todd Stinebrickner & Ralph Stinebrickner, 2001. "Working During School and Academic Performance," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20011, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
    2. Rothstein, Jesse & Rouse, Cecilia Elena, 2011. "Constrained after college: Student loans and early-career occupational choices," Journal of Public Economics, Elsevier, vol. 95(1-2), pages 149-163, February.
    3. Jeff Dominitz & Charles F. Manski, 1996. "Eliciting Student Expectations of the Returns to Schooling," Journal of Human Resources, University of Wisconsin Press, vol. 31(1), pages 1-26.
    4. Kahn, Lisa B., 2010. "The long-term labor market consequences of graduating from college in a bad economy," Labour Economics, Elsevier, vol. 17(2), pages 303-316, April.
    5. Mark Hoekstra, 2009. "The Effect of Attending the Flagship State University on Earnings: A Discontinuity-Based Approach," The Review of Economics and Statistics, MIT Press, vol. 91(4), pages 717-724, November.
    6. James P. Smith & Finis Welch, 1978. "The Overeducated American? A Review Article," UCLA Economics Working Papers 147, UCLA Department of Economics.
    7. John Bound & Michael F. Lovenheim & Sarah Turner, 2010. "Why Have College Completion Rates Declined? An Analysis of Changing Student Preparation and Collegiate Resources," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 129-57, July.
    8. Stacey H. Chen, 2008. "Estimating the Variance of Wages in the Presence of Selection and Unobserved Heterogeneity," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 275-289, May.
    9. Alan B. Krueger & William G. Bowen, 1993. "Policy Watch: Income-Contingent College Loans," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 193-201, Summer.
    10. Jeff Grogger & Eric Eide, 1995. "Changes in College Skills and the Rise in the College Wage Premium," Journal of Human Resources, University of Wisconsin Press, vol. 30(2), pages 280-310.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Brad J. Hershbein & Kevin Hollenbeck, 2013. "The Distribution of College Graduate Debt, 1990 to 2008: A Decomposition Approach," Upjohn Working Papers and Journal Articles 14-204, W.E. Upjohn Institute for Employment Research.
    2. repec:hka:wpaper:2013-20 is not listed on IDEAS
    3. Caroline Hoxby & Sarah Turner, . "Expanding College Opportunities for High-Achieving, Low Income Students," Discussion Papers 12-014, Stanford Institute for Economic Policy Research.
    4. Lance Lochner & Todd Stinebrickner & Utky Suleymanoglu, 2013. "The Importance of Financial Resources for Student Loan Repayment," University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers 20137, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
    5. Gicheva, Dora & Thompson, Jeffrey, 2014. "The Effects of Student Loans on Long-Term Household Financial Stability," Working Papers 14-2, University of North Carolina at Greensboro, Department of Economics.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:aea:jecper:v:26:y:2012:i:1:p:165-92. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros) or (Michael P. Albert).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.