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Taking It to the Limit: Effects of Increased Student Loan Availability on Attainment, Earnings, and Financial Well-Being

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Listed:
  • Black, Sandra E.

    (Columbia University)

  • Denning, Jeffrey T.

    (University of Notre Dame)

  • Dettling, Lisa J.

    (Federal Reserve Board of Governors)

  • Goodman, Sarena

    (Federal Reserve Board of Governors)

  • Turner, Lesley

    (Vanderbilt University)

Abstract

Growing reliance on student loans and repayment difficulties have raised concerns of a student debt crisis in the United States, but 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 combined with administrative datasets to identify the effects of increased access to student loans 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.

Suggested Citation

  • Black, Sandra E. & Denning, Jeffrey T. & Dettling, Lisa J. & Goodman, Sarena & Turner, Lesley, 2023. "Taking It to the Limit: Effects of Increased Student Loan Availability on Attainment, Earnings, and Financial Well-Being," IZA Discussion Papers 15874, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp15874
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    Cited by:

    1. Been, Jim & Knoef, Marike, 2023. "Student loans, spending, and parental transfers: insights from a nudge in student loan policy in the Netherlands," Other publications TiSEM d360b770-5a7a-449a-84be-3, Tilburg University, School of Economics and Management.
    2. Celeste K. Carruthers & Christopher Jepsen, 2020. "Vocational Education: An International Perspective," CESifo Working Paper Series 8718, CESifo.
    3. Catherine, Sylvain & Yannelis, Constantine, 2023. "The distributional effects of student loan forgiveness," Journal of Financial Economics, Elsevier, vol. 147(2), pages 297-316.
    4. Berrak Bahadir & Dora Gicheva, 2022. "Macroeconomic Implications of Student Debt: A State‐Level Analysis," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(8), pages 2273-2300, December.
    5. Kelchen, Robert & Ortagus, Justin & Rosinger, Kelly & Cassell, Alex, 2022. "The effects of state performance funding policies on student loan debt," Economics of Education Review, Elsevier, vol. 91(C).
    6. Chu, Yu-Wei Luke & Cuffe, Harold E, 2020. "Do Struggling Students Benefit From Continued Student Loan Access? Evidence From University and Beyond," Working Paper Series 21067, Victoria University of Wellington, School of Economics and Finance.
    7. Alvaro Mezza & Daniel R. Ringo & Kamila Sommer, 2021. "Student Loans, Access to Credit and Consumer Financial Behavior," Finance and Economics Discussion Series 2021-050, Board of Governors of the Federal Reserve System (U.S.).
    8. Michael Dinerstein & Constantine Yannelis & Ching-Tse Chen, 2023. "Debt Moratoria: Evidence from Student Loan Forbearance," NBER Working Papers 31247, National Bureau of Economic Research, Inc.
    9. Matsuda, Kazushige & Mazur, Karol, 2022. "College education and income contingent loans in equilibrium," Journal of Monetary Economics, Elsevier, vol. 132(C), pages 100-117.
    10. Mangrum, Daniel, 2022. "Personal finance education mandates and student loan repayment," Journal of Financial Economics, Elsevier, vol. 146(1), pages 1-26.

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    More about this item

    Keywords

    credit constraints; student debt;

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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