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Borrowing Constraints, College Enrollment, and Delayed Entry

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  • Matthew T. Johnson

    (Mathematica Policy Research, Inc.)

Abstract

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.

Suggested Citation

  • Matthew T. Johnson, 2010. "Borrowing Constraints, College Enrollment, and Delayed Entry," Working Papers 2011-006, Human Capital and Economic Opportunity Working Group, revised Sep 2012.
    • Handle: RePEc:hka:wpaper:2011-006
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    File URL: http://humcap.uchicago.edu/RePEc/hka/wpaper/Johnson_2012_borrowing-constraints-college.pdf
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    Cited by:

    1. Nicholas Lawson, 2014. "Liquidity Constraints, Fiscal Externalities and Optimal Tuition Subsidies Optimal College Tuition Subsidies," AMSE Working Papers 1404, Aix-Marseille School of Economics, France, revised 18 Mar 2014.
    2. Nicholas Lawson, 2017. "Liquidity Constraints, Fiscal Externalities, and Optimal Tuition Subsidies," American Economic Journal: Economic Policy, American Economic Association, vol. 9(4), pages 313-343, November.

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