Credit Constraints and Demand for Higher Education: Evidence from Financial Deregulation

Stephen Teng Sun and Constantine Yannelis

MPRA Paper from University Library of Munich, Germany

Abstract: This paper uses staggered bank branching deregulation across states in the United States to examine the impact of the resulting increase in the supply of credit on college enrollment from the 70s to early 90s. A significant advantage of our research design is that it produces estimates that are not confounded by wealth effects. We find that lifting branching restrictions raises college enrollment by about 2 percentage points (4%). Our results rule out alternative interpretations to the credit constraints channel. First, the effects are largest for low and middle income families, while insignificant for upper income families as well as bankrupt families who would have been unaffected by the increased access to private credit. Second, the effect of lifting branching restrictions subsided immediately following periods of increased loan limit through government student loan programs. We also show that household educational borrowing increased as a result of lifting branching restrictions. Our results provide novel evidence that credit constraints play an important role in determining household college enrollment decisions in the United States.

Keywords: Credit Constraints; College Enrollment; Banking Deregulation; Human Capital (search for similar items in EconPapers)
JEL-codes: H52 H81 I22 J24 (search for similar items in EconPapers)
Date: 2013-07-30
New Economics Papers: this item is included in nep-edu
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Citations: View citations in EconPapers (20)

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Related works:
Journal Article: Credit Constraints and Demand for Higher Education: Evidence from Financial Deregulation (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:48726

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