Student Loans: Liquidity Constraint and Higher Education in South Africa

Agence Française de Développement Working Paper No. 117

48 Pages Posted: 8 Dec 2011 Last revised: 18 Dec 2011

See all articles by Marc Gurgand

Marc Gurgand

National Center for Scientific Research (CNRS); National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Adrien J.S. Lorenceau

Paris School of Economics (PSE)

Thomas Mélonio

affiliation not provided to SSRN

Date Written: September 7, 2011

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 potential South African students, depending on whether or not they get a loan to cover their university fees, in a context where such fees are high. We use matched individual data from a credit institution (Eduloan) and from the Department of Education. Using a regression-discontinuity design based on 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 reduces the enrollment rate into higher education by more than 20 percentage points in a population of student loan applicants.

Keywords: education, credit, South Africa, EduLoan, AFD, higher education

JEL Classification: I22

Suggested Citation

Gurgand, Marc and Lorenceau, Adrien J.S. and Mélonio, Thomas, Student Loans: Liquidity Constraint and Higher Education in South Africa (September 7, 2011). Agence Française de Développement Working Paper No. 117, Available at SSRN: https://ssrn.com/abstract=1969424 or http://dx.doi.org/10.2139/ssrn.1969424

Marc Gurgand (Contact Author)

National Center for Scientific Research (CNRS) ( email )

3, rue Michel-Ange
Paris cedex 16, 75794
France

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

Adrien J.S. Lorenceau

Paris School of Economics (PSE) ( email )

48 Boulevard Jourdan
Paris, 75014 75014
France

Thomas Mélonio

affiliation not provided to SSRN

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