A day late and a dollar short: Liquidity and household formation among student borrowers

Sarena Goodman, Adam Isen and Constantine Yannelis

Journal of Financial Economics, 2021, vol. 142, issue 3, 1301-1323

Abstract: The federal government encourages human capital investment through lending and grant programs, but resources from these programs may also finance non-education activities for liquidity-constrained students. To explore this possibility, we use administrative data for federal student borrowers linked to tax records and a sharp discontinuity generated by the timing of a student's 24th birthday, which induces a jump in federal support. We estimate a corresponding increase in homeownership, with larger effects among those most financially constrained, and find supplemental evidence of lagged marriage and fertility effects. Analysis of earnings, savings, and heterogeneity favors liquidity over human capital in explaining the results.

Keywords: Human capital; Student loans; Homeownership; Mortgage; Household finance (search for similar items in EconPapers)
JEL-codes: D14 H52 H81 J24 R21 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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Working Paper: A Day Late and a Dollar Short: Liquidity and Household Formation among Student Borrowers (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:142:y:2021:i:3:p:1301-1323

DOI: 10.1016/j.jfineco.2021.04.033

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