Education Financing and Student Lending
Gene Amromin and
Janice Eberly
Annual Review of Financial Economics, 2016, vol. 8, issue 1, 289-315
Abstract:
As the cost of education rises and student debt reaches new highs, more research has focused on financing the acquisition of human capital. Most research has had a positive focus, examining the effect of debt on student choices and outcomes. However, because education financing involves many public policy choices, normative questions have become more prominent. We discuss the trade-offs involved in these choices and propose simple models to help shape these questions. We first develop an overlapping generations framework of student debt to examine the macroeconomic impact of shifting from a parent-funded to a student debt–based financing system. We then consider a framework that includes the supply-side response to different funding regimes; that is, how do enrollment and tuition decisions of schools respond to changes in education financing? We show that shifting from parent-based funding to a student loan program can lower aggregate savings, although welfare still improves if education has a higher return than physical capital investment. A public student loan program also tends to promote enrollment at the cost of higher tuition at for-profit schools and deteriorating loan performance, paid for by taxpayers. Alternative contract designs, with school participation in the lending program, tend to ameliorate these issues.
Keywords: student loans; education finance (search for similar items in EconPapers)
JEL-codes: I21 I24 J24 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (5)
Downloads: (external link)
http://www.annualreviews.org/doi/10.1146/annurev-financial-121415-033040 (application/pdf)
Full text downloads are only available to subscribers. Visit the abstract page for more information.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:anr:refeco:v:8:y:2016:p:289-315
Ordering information: This journal article can be ordered from
http://www.annualreviews.org/action/ecommerce
Access Statistics for this article
More articles in Annual Review of Financial Economics from Annual Reviews Annual Reviews 4139 El Camino Way Palo Alto, CA 94306, USA.
Bibliographic data for series maintained by http://www.annualreviews.org ().