Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs

59 Pages Posted: 7 Sep 2017

See all articles by David O. Lucca

David O. Lucca

Federal Reserve Banks - Federal Reserve Bank of New York

Taylor Nadauld

Brigham Young University

Karen Shen

Federal Reserve Banks - Federal Reserve Bank of New York

Multiple version iconThere are 2 versions of this paper

Date Written: 2015-07-01

Abstract

We study the link between the student credit expansion of the past fifteen years and the contemporaneous rise in college tuition. To disentangle simultaneity issues, we analyze the effects of increases in federal student loan caps using detailed student-level financial data. We find a pass-through effect on tuition of changes in subsidized loan maximums of about 60 cents on the dollar, and smaller but positive effects for unsubsidized federal loans. The subsidized loan effect is most pronounced for more expensive degrees, those offered by private institutions, and for two-year or vocational programs.

Keywords: student loans, college tuition

JEL Classification: G28, I22

Suggested Citation

Lucca, David O. and Nadauld, Taylor and Shen, Karen, Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs (2015-07-01). FRB of NY Staff Report No. 733. Available at SSRN: https://ssrn.com/abstract=3029751

David O. Lucca (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of New York ( email )

33 Liberty Street
New York, NY 10045
United States

Taylor Nadauld

Brigham Young University ( email )

Provo, UT 84602
United States

Karen Shen

Federal Reserve Banks - Federal Reserve Bank of New York

33 Liberty Street
New York, NY 10045
United States

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