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The Federal Student Loan Program: Quantitative Implications for College Enrollment and Default Rates

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  • Felicia Ionescu

    (Colgate University)

Abstract

I quantify the effects of alternative student loan policies on college enrollment, borrowing behavior, and default rates in a heterogeneous model of life-cycle earnings and human capital accumulation. I find that the combination of learning ability and initial stock of human capital drives the decision to enroll in college, while parental wealth has minimal effects on enrollment. Repayment flexibility increases enrollment significantly, whereas relaxation of eligibility requirements has little effect on enrollment or default rates. The former policy benefits low-income households, while the latter has negligible effects on these households. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2008.09.004
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 12 (2009)
Issue (Month): 1 (January)
Pages: 205-231

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Handle: RePEc:red:issued:07-196

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Keywords: Student loans; Human capital; Default;

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References

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  1. Felicia Ionescu & Satyajit Chatterjee, 2008. "Insuring College Failure Risk," 2008 Meeting Papers 813, Society for Economic Dynamics.
  2. Cunha, Flavio & Heckman, James J. & Lochner, Lance & Masterov, Dimitriy V., 2005. "Interpreting the Evidence on Life Cycle Skill Formation," IZA Discussion Papers 1675, Institute for the Study of Labor (IZA).
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Citations

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Cited by:
  1. John Bailey Jones & Fang (Annie) Yang, 2011. "Skill-Biased Technical Change and the Cost of Higher Education: An Exploratory Model," Discussion Papers 11-02, University at Albany, SUNY, Department of Economics.
  2. Gary-Bobo, Robert J. & Trannoy, Alain, 2013. "Optimal Student Loans and Graduate Tax under Moral Hazard and Adverse Selection," CEPR Discussion Papers 9505, C.E.P.R. Discussion Papers.
  3. John Bailey Jones & Fang Yang, 2012. "Skill-Biased Technical Change and the Cost of Higher Education," Discussion Papers 12-08, University at Albany, SUNY, Department of Economics.
  4. Holter, Hans A, 2011. "Accounting for Cross-Country Differences in Intergenerational Earnings Persistence: The Impact of Taxation and Public Education Expenditure," Working Paper Series 2011:21, Uppsala University, Department of Economics.
  5. Nicole Simpson & Felicia Ionescu, 2010. "Credit Scores and College Investment," 2010 Meeting Papers 666, Society for Economic Dynamics.
  6. Gonzalo Castex, 2010. "Accounting for Changes in College Attendance Profile: a Quantitative Life-Cycle Analysis," Working Papers Central Bank of Chile 598, Central Bank of Chile.
  7. Gonzalo Castex, 2011. "College Risk and Return," Working Papers Central Bank of Chile 606, Central Bank of Chile.

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