Measuring the Effect of Student Loans on College Persistence
48 Pages Posted: 2 Jun 2020 Last revised: 6 Jul 2022
Date Written: May 2020
Governments around the world use grant and loan programs to ease the financial constraints that contribute to socioeconomic gaps in college completion. A growing body of research assesses the impact of grants; less is known about how loan programs affect persistence and degree completion. We use detailed administrative data from Chile to provide rigorous regression-discontinuity-based evidence on the impacts of loan eligibility for university students who retake the national admission test after their first year of studies. Those who score above a certain threshold become eligible for loans covering around 85% of tuition costs for the duration of their program. We find that access to loans increases the fraction who return to university for a second year by 20 percentage points, with two-thirds of the effect arising from a reduction in transfers to vocational colleges and one-third from a decline in the share who stop post-secondary schooling altogether. The longer-run impacts are smaller but remain highly significant, with a 12 percentage point impact on the fraction of marginally eligible retakers who complete a bachelor's degree.
Suggested Citation: Suggested Citation