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Job Loss, Credit Card Loans, and the College-persistence Decision of US Working Students

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Abstract

This study assesses the impact of involuntary job loss on college persistence by leveraging different job-loss timings relative to a student’s college enrollment decision. We find that job loss increases the probability that a working college student leaves college before attaining a degree, but access to short-term credit through credit card loans buffers this liquidity effect. By restricting credit supply to college students, the CARD Act of 2009 has inadvertently inhibited the ability of liquidity-constrained students to remain in college when their earnings unexpectedly fall, resulting in a stronger liquidity effect of job loss on college persistence over the last decade.

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  • Lucy McMillan & Pinghui Wu, 2023. "Job Loss, Credit Card Loans, and the College-persistence Decision of US Working Students," Working Papers 23-19, Federal Reserve Bank of Boston.
    • Handle: RePEc:fip:fedbwp:97524
    DOI: 10.29412/res.wp.2023.19
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    More about this item

    Keywords

    credit card loans; unemployment; college persistence;
    All these keywords.

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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