Job Loss, Credit Card Loans, and the College-persistence Decision of US Working Students

Lucy McMillan and Pinghui Wu

No 23-19, Working Papers from Federal Reserve Bank of Boston

Abstract: This study assesses the impact of involuntary job loss on college persistence by leveraging different job-loss timings relative to a student’s college enrollment decision. We find that job loss increases the probability that a working college student leaves college before attaining a degree, but access to short-term credit through credit card loans buffers this liquidity effect. By restricting credit supply to college students, the CARD Act of 2009 has inadvertently inhibited the ability of liquidity-constrained students to remain in college when their earnings unexpectedly fall, resulting in a stronger liquidity effect of job loss on college persistence over the last decade.

Keywords: credit card loans; unemployment; college persistence (search for similar items in EconPapers)
JEL-codes: I22 I23 J64 (search for similar items in EconPapers)
Pages: 59
Date: 2023-10-01
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedbwp:97524

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DOI: 10.29412/res.wp.2023.19

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