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Student loans: Liquidity constraint and higher education in South Africa

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  • Marc Gurgand

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique, J-PAL Europe - Abdul Latif Jameel Poverty Action Lab - Europe, PSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique)

  • Adrien Lorenceau

    (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris Sciences et Lettres - EHESS - École des hautes études en sciences sociales - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Thomas Mélonio

    (AFD - Agence française de développement)

Abstract

Empirical evidence that access to higher education is constrained by credit availability is limited and usually indirect. This paper provides direct evidence by comparing university enrollment rates of South African potential students, depending on whether they get a loan or not to cover their registration fees, in a context where such fees are high. We use matched individual data from both a credit institution (Eduloan) and the Department of Education. Based on a regression discontinuity design using the fact that loans are granted according to a credit score threshold, we can estimate the causal impact of loan obtainment. We find that the credit constraint is substantial, as it decreases the enrollment rate into higher education by more than 20 percentage points in a population of student loan applicants.

Suggested Citation

  • Marc Gurgand & Adrien Lorenceau & Thomas Mélonio, 2011. "Student loans: Liquidity constraint and higher education in South Africa," PSE Working Papers halshs-00590898, HAL.
    • Handle: RePEc:hal:psewpa:halshs-00590898
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00590898v1
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    Cited by:

    1. David Lam & Cally Ardington & Nicola Branson & Murray Leibbrandt, 2013. "Credit Constraints and the Racial Gap in Post-Secondary Education in South Africa," NBER Working Papers 19607, National Bureau of Economic Research, Inc.
    2. Maria Ines Barbosa Camargo & Antonio García Sánchez & Mª Luisa Ridao Carlini, 2016. "Influencia de las ayudas financieras en el acceso a estudios universitarios: El caso de Colombia," Investigaciones de Economía de la Educación volume 11, in: José Manuel Cordero Ferrera & Rosa Simancas Rodríguez (ed.), Investigaciones de Economía de la Educación 11, edition 1, volume 11, chapter 4, pages 91-110, Asociación de Economía de la Educación.
    3. 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.
    4. repec:spo:wpmain:info:hdl:2441/527ht1a96e837pq2dubgo2953q is not listed on IDEAS
    5. 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).
    6. Clair Null & Clemencia Cosentino & Swetha Sridharan & Laura Meyer, "undated". "Policies and Programs to Improve Secondary Education in Developing Countries: A Review of the Evidence," Mathematica Policy Research Reports 516e420e637c4851b15e6a3f6, Mathematica Policy Research.
    7. Alex Solis, 2017. "Credit Access and College Enrollment," Journal of Political Economy, University of Chicago Press, vol. 125(2), pages 562-622.
    8. Rodrigo Azuero & David Zarruk Valencia, 2016. "The Effects of Student Loans on the Provision and Demand for Higher Education," PIER Working Paper Archive 17-020, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 22 Oct 2017.
    9. Wiederspan, Mark, 2016. "Denying loan access: The student-level consequences when community colleges opt out of the Stafford loan program," Economics of Education Review, Elsevier, vol. 51(C), pages 79-96.
    10. Molina, Teresa & Rivadeneyra, Ivan, 2021. "The schooling and labor market effects of eliminating university tuition in Ecuador," Journal of Public Economics, Elsevier, vol. 196(C).
    11. Estelle Herbaut & Koen Geven, 2019. "What Works to Reduce Inequalities in Higher Education? A Systematic Review of the (Quasi-)Experimental Literature on Outreach and Financial Aid," Sciences Po Economics Publications (main) hal-03456943, HAL.
    12. Estelle Herbaut & Koen Geven, 2019. "What Works to Reduce Inequalities in Higher Education? A Systematic Review of the (Quasi-)Experimental Literature on Outreach and Financial Aid," Working Papers hal-03456943, HAL.
    13. Andrew Kerr & Patrizio Piraino & Vimal Ranchhod, 2016. "Estimating the size and impact of Affirmative Action at the University of Cape Town," SALDRU Working Papers 172, Southern Africa Labour and Development Research Unit, University of Cape Town.
    14. Aguirre, Josefa, 2021. "Long-term effects of grants and loans for vocational education," Journal of Public Economics, Elsevier, vol. 204(C).
    15. Lindsay C. Page & Judith Scott-Clayton, 2015. "Improving College Access in the United States: Barriers and Policy Responses," NBER Working Papers 21781, National Bureau of Economic Research, Inc.
    16. Montoya, Ana Maria & Noton, Carlos & Solis, Alex, 2018. "The Returns to College Choice: Loans, Scholarships and Labor Outcomes," Working Paper Series 2018:12, Uppsala University, Department of Economics.
    17. 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.
    18. Dayanand S. Manoli & Nicholas Turner, 2014. "Cash-on-Hand & College Enrollment: Evidence from Population Tax Data and Policy Nonlinearities," NBER Working Papers 19836, National Bureau of Economic Research, Inc.
    19. Jeongeun Kim & Mark Wiederspan, 2021. "Evaluating South Korea’s Introduction of an Income Contingent Loan Program," Research in Higher Education, Springer;Association for Institutional Research, vol. 62(1), pages 1-25, February.
    20. Page, Lindsay C. & Scott-Clayton, Judith, 2016. "Improving college access in the United States: Barriers and policy responses," Economics of Education Review, Elsevier, vol. 51(C), pages 4-22.
    21. Zhang, Jiaping & Zhang, Huirong & Gong, Xiaomei, 2022. "Mobile payment and rural household consumption: Evidence from China," Telecommunications Policy, Elsevier, vol. 46(3).
    22. Susan M. Dynarski, 2015. "An Economist's Perspective on Student Loans in the United States," CESifo Working Paper Series 5579, CESifo.
    23. Hendrik van Broekhuizen, 2015. "Teacher Supply in South Africa: A Focus on Initial Teacher Education Graduate Production," Working Papers 07/2015, Stellenbosch University, Department of Economics.
    24. Maria Ines Barbosa Camargo, 2015. "Efectos de los mecanismos de financiación en el acceso a la educación superior en Colombia," Investigaciones de Economía de la Educación volume 10, in: Marta Rahona López & Jennifer Graves (ed.), Investigaciones de Economía de la Educación 10, edition 1, volume 10, chapter 5, pages 115-134, Asociación de Economía de la Educación.
    25. Francesca Marchetta & Tom Dilly, 2019. "Supporting Education in Africa: Opportunities and Challenges for an Impact Investor," Working Papers hal-02288103, HAL.

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