Measuring the Effect of Student Loans on College Persistence

48 Pages Posted: 2 Jun 2020 Last revised: 6 Jul 2022

See all articles by David Card

David Card

University of California, Berkeley - Department of Economics; Institute for the Study of Labor (IZA); National Bureau of Economic Research (NBER)

Alex Solis

Uppsala University, Universidad Catolica de la Santisima Concepcion

Date Written: May 2020

Abstract

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

Card, David E. and Solis, Alex, Measuring the Effect of Student Loans on College Persistence (May 2020). NBER Working Paper No. w27269, Available at SSRN: https://ssrn.com/abstract=3615465

David E. Card (Contact Author)

University of California, Berkeley - Department of Economics ( email )

Room 3880
Berkeley, CA 94720-3880
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Institute for the Study of Labor (IZA)

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Germany

National Bureau of Economic Research (NBER)

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Alex Solis

Uppsala University, Universidad Catolica de la Santisima Concepcion ( email )

Box 513
Uppsala, 751 20
Sweden

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