Credit Supply and the Rise in College Tuition: Evidence from the Expansion in Federal Student Aid Programs
59 Pages Posted: 7 Sep 2017
Date Written: 2015-07-01
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: Suggested Citation