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Borrowing Constraints, College Enrollment, and Delayed Entry

  • Matthew T. Johnson

    ()

    (Mathematica Policy Research, Inc.)

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    In this paper I propose and estimate a dynamic model of education, borrowing, and work decisions of high school graduates. I examine the effect of relaxing borrowing constraints on educational attainment by simulating increases in the amount students are permitted to borrow from government sponsored loan programs. My results indicate that borrowing constraints have a small impact on college completion: the removal of education related borrowing constraints increases degree completion by 1.1 percentage points. Tuition subsidies have much larger impacts. I find that increased subsidies for middle income households are the most cost effective method to raise degree completion.

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    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Johnson_2012_borrowing-constraints-college.pdf
    File Function: First version, September 21, 2010
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    Paper provided by Human Capital and Economic Opportunity Working Group in its series Working Papers with number 2011-006.

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    Date of creation: Sep 2010
    Date of revision: Sep 2012
    Handle: RePEc:hka:wpaper:2011-006
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    Contact details of provider: Web page: http://www.hceconomics.org/
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    19. Joseph Altonji, 2012. "Modeling Earnings Dynamics," 2012 Meeting Papers 1180, Society for Economic Dynamics.
    20. Donghoon Lee & Matthew Wiswall, 2007. "A Parallel Implementation of the Simplex Function Minimization Routine," Computational Economics, Society for Computational Economics, vol. 30(2), pages 171-187, September.
    21. Stephen V. Cameron & Christopher Taber, 2004. "Estimation of Educational Borrowing Constraints Using Returns to Schooling," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 132-182, February.
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    24. Nicole M. Fortin, 2006. "Higher-Education Policies and the College Wage Premium: Cross-State Evidence from the 1990s," American Economic Review, American Economic Association, vol. 96(4), pages 959-987, September.
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