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Measuring the Effect of Student Loans on College Persistence

Author

Listed:
  • David Card

    (Department of Economics University of California Berkeley Berkeley, CA 94720-3880)

  • Alex Solis

    (Department of Economics Visiting Researcher Stockholm School of Economics SE-113 83 Stockholm, Sweden)

Abstract

Governments around the world use grant and loan programs to ease the financial constraints that contribute to socioeconomic gaps in college completion. A growing body of research assesses the impact of grants; less is known about how loan programs affect persistence and degree completion. We use detailed administrative data from Chile to provide rigorous regression discontinuity-based evidence on the impacts of loan eligibility for university students who retake the national admission test after their first year of studies. Those who score above a certain threshold become eligible for loans covering around 85 percent of tuition costs for the duration of their program. We find that access to loans increases by 20 percentage points the fraction who return to university for a second year, with two thirds of the effect arising from a reduction in transfers to vocational colleges and one third from a decline in the share who stop postsecondary schooling altogether. The longer-run impacts are smaller but remain highly significant, with a 12 percentage point impact on the fraction of marginally eligible retakers who complete a bachelor's degree.

Suggested Citation

  • David Card & Alex Solis, 2022. "Measuring the Effect of Student Loans on College Persistence," Education Finance and Policy, MIT Press, vol. 17(2), pages 335-366, Spring.
    • Handle: RePEc:tpr:edfpol:v:17:y:2022:i:2:p:335-366
    DOI: 10.1162/edfp_a_00342
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    Cited by:

    1. Wright, Nicholas A., 2021. "Need-based financing policies, college decision-making, and labor market behavior: Evidence from Jamaica," Journal of Development Economics, Elsevier, vol. 150(C).
    2. repec:fip:fedpwp:97987 is not listed on IDEAS
    3. Alsaeed Alshamy & Abdourahmane Barry, 2024. "Experiences of Graduate Students of the First Cohort on Cost-Sharing Policies in Saudi Public Universities: Lessons Learned and Recommendations for Policy and Practice," SAGE Open, , vol. 14(2), pages 21582440241, May.
    4. Christian Belzil & Jörgen Hansen & Julie Pernaudet, 2024. "Separating the Structural and Composition Impacts of Financial Aid on the Choice of Major," Working Papers 2024-14, Center for Research in Economics and Statistics.
    5. Shuyu Qi & Qiutong Ma & Xiaohui Ji, 2022. "The Influence of Financial Aid Systems on Student Academic Development in Higher Education in China," Sustainability, MDPI, vol. 14(21), pages 1-20, October.
    6. Tomás Monarrez & Lesley J. Turner, 2024. "The Effect of Student Loan Payment Burdens on Borrower Outcomes," Working Papers 24-08, Federal Reserve Bank of Philadelphia.
    7. Sandra E. Black & Jeffrey T. Denning & Lisa J. Dettling & Sarena Goodman & Lesley J. Turner, 2023. "Taking It to the Limit: Effects of Increased Student Loan Availability on Attainment, Earnings, and Financial Well-Being," American Economic Review, American Economic Association, vol. 113(12), pages 3357-3400, December.
    8. Michel Grosz & Tomás Monarrez, 2025. "The Effect of the Great Recession on Student Loan Borrowing and Repayment," Working Papers 25-13, Federal Reserve Bank of Philadelphia.

    More about this item

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid

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