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Student Loan Debt Response to Tuition Changes

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  • Zachary Jacob Dowdy
  • Tennecia Dacass

Abstract

Amid rising concerns regarding student loan debt, we examine the effect of Washington State’s College Affordability Program introduced in 2015 on undergraduate student loan debt to provide policy-makers with additional tools to help prevent another student loan debt crisis. The program reduced tuition for resident full-time undergraduate students at public colleges and universities for two consecutive academic years. This policy adoption created a natural experiment that we exploit to identify a causal link between tuition and loans. Using college-level data for the 2009–2010 through 2021–2022 academic years and employing a difference-in-differences model in conjunction with nearest-neighbor matching, we show that a decrease in college tuition following the adoption of the College Affordability Program caused a $637.96 (9 percentage-point) decline in average loans among first-time, full-time undergraduates in Washington State relative to undergraduates from matched U.S. schools. JEL Codes: G28, I22

Suggested Citation

  • Zachary Jacob Dowdy & Tennecia Dacass, 2024. "Student Loan Debt Response to Tuition Changes," The American Economist, Sage Publications, vol. 69(1), pages 108-134, March.
    • Handle: RePEc:sae:amerec:v:69:y:2024:i:1:p:108-134
    DOI: 10.1177/05694345231192981
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

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