Do Academically Struggling Students Benefit from Continued Student Loan Access? Evidence from University and Beyond

Yu-Wei Chu and Harold E. Cuffe
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Harold E. Cuffe: Victoria University of Wellington

The Review of Economics and Statistics, 2024, vol. 106, issue 1, 68-84

Abstract: We estimate the effects of student loan access on educational attainment and labor market returns in New Zealand. We exploit the introduction of a national policy mandating a 50% pass rate for student loan renewals using a regression discontinuity design. Retaining loan access increases reenrollment for students around the threshold, and a majority eventually graduate with a bachelor's degree within seven years. We find that retaining student loan access leads to large labor market returns for struggling students. The additional debt from further borrowing is small relative to the earnings returns and declines quickly due to faster repayment.

Date: 2024
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