The consequences of student loan credit expansions: Evidence from three decades of default cycles

W. Looney and Constantine Yannelis

Journal of Financial Economics, 2022, vol. 143, issue 2, 771-793

Abstract: This paper studies the link between credit availability and student loan repayment using administrative federal student loan data. We demonstrate that policy-driven changes in credit available to high-default institutions explain almost all of the historical time-series variation in defaults. Between 1981 and 1988, eligibility for federal loans was expanded, leading to the entry of institutions with borrowers more likely to default. From 1988 to 1992, credit access was tightened, leading to the exit of many institutions with high default rates. After 1992, the cycle was repeated, with credit access gradually loosened by unwinding many of the pre-1992 reforms.

Keywords: Household finance; Credit expansion; Human Capital; Loan default (search for similar items in EconPapers)
JEL-codes: D14 G28 H52 H81 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (5)

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Related works:
Working Paper: The Consequences of Student Loan Credit Expansions: Evidence from Three Decades of Default Cycles (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:143:y:2022:i:2:p:771-793

DOI: 10.1016/j.jfineco.2021.06.013

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