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Maxed Out? The Effect of Larger Student Loan Limits on Borrowing and Education Outcomes

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  • Denning, Jeffrey T.

    (University of Texas at Austin)

  • Jones, Todd R.

    (Mississippi State University)

Abstract

Despite large and growing student loan balances, there is relatively little evidence on the effects of access to student loans on borrowing and educational outcomes. We examine the effect of access to credit by using policy variation in the maximum federal student loan amounts available to U.S. college students. In particular, first-, second-, and third-year students have access to different amounts of federal student loans. Using a regression discontinuity and administrative data from a state higher education system, we find that access to higher loan limits increases borrowing for at least 26 percent of borrowers. Despite this increase in borrowing, we find no evidence that eligibility for additional loans affects student GPA, persistence, or graduation.

Suggested Citation

  • Denning, Jeffrey T. & Jones, Todd R., 2019. "Maxed Out? The Effect of Larger Student Loan Limits on Borrowing and Education Outcomes," IZA Discussion Papers 12239, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp12239
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    Cited by:

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    3. Ege Aksu & Sidhya Balakrishnan & Eric Bettinger & Jonathan S. Hartley & Michael S. Kofoed & Dubravka Ritter & Douglas A. Webber, 2024. "Navigating Higher Education Insurance: An Experimental Study on Demand and Adverse Selection"," Working Papers 24-07, Federal Reserve Bank of Philadelphia.
    4. Pernagallo, Giuseppe, 2024. "The student funding dilemma," The Journal of Economic Asymmetries, Elsevier, vol. 30(C).
    5. Chu, Yu-Wei Luke & Cuffe, Harold E, 2020. "Do Struggling Students Benefit From Continued Student Loan Access? Evidence From University and Beyond," Working Paper Series 21067, Victoria University of Wellington, School of Economics and Finance.
    6. Todd R. Jones & Daniel Kreisman & Ross Rubenstein & Cynthia Searcy & Rachana Bhatt, 2022. "The Effects of Financial Aid Loss on Persistence and Graduation: A Multi-Dimensional Regression Discontinuity Approach," Education Finance and Policy, MIT Press, vol. 17(2), pages 206-231, Spring.
    7. Barr, Andrew & Bird, Kelli A. & Castleman, Benjamin L., 2021. "The effect of reduced student loan borrowing on academic performance and default: Evidence from a loan counseling experiment," Journal of Public Economics, Elsevier, vol. 202(C).
    8. 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.
    9. Michael D. Bloem, 2023. "Impacts of Transfer Admissions Requirements: Evidence from Georgia," Research in Higher Education, Springer;Association for Institutional Research, vol. 64(6), pages 834-861, September.
    10. Alvaro Mezza & Daniel R. Ringo & Kamila Sommer, 2021. "Student Loans, Access to Credit and Consumer Financial Behavior," Finance and Economics Discussion Series 2021-050, Board of Governors of the Federal Reserve System (U.S.).
    11. Don Tawanpitak, 2024. "Paying Tuition under Few Credit Constraints: Debt, Field of Study, and Drop Out," PIER Discussion Papers 226, Puey Ungphakorn Institute for Economic Research, revised Jan 2025.
    12. Aizat Nurshatayeva & Lindsay C. Page & Carol C. White & Hunter Gehlbach, 2021. "Are Artificially Intelligent Conversational Chatbots Uniformly Effective in Reducing Summer Melt? Evidence from a Randomized Controlled Trial," Research in Higher Education, Springer;Association for Institutional Research, vol. 62(3), pages 392-402, May.

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    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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