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

Yu-Wei Chu () and Harold E Cuffe

No 8873, Working Paper Series from Victoria University of Wellington, School of Economics and Finance

Abstract: We estimate the effects of access to student loans on university students’ educational attainment and labor market returns in New Zealand. We exploit the introduction of a policy mandating a minimum pass rate of 50% for student loan renewals using a fuzzy regression discontinuity design and linked administrative records. For students around the threshold, retaining access to student loans increases their likelihood of re-enrollment by 70 percentage points, fiveyear completion rates by 40 percentage points, and seven-year completion rates by 70 percentage points. The effects are observed primarily among female students due to a substantial gender difference in compliance with the pass rate criterion. We find that retaining student loans likely leads to large labor market returns for female students, though the point estimates are often imprecise. Importantly, for struggling students, the return on further borrowing facilitates quick repayment of their student loan debt.

Keywords: Student loans; New Zealand; Tertiary study; University students (search for similar items in EconPapers)
Date: 2020
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Handle: RePEc:vuw:vuwecf:8873