Federal Reserve Bank of New York
Credit supply and the rise in college tuition: evidence from the expansion in federal student aid programs
We study the link between the student credit expansion of the past fifteen years and the contemporaneous rise in college tuition. To disentangle simultaneity issues, we analyze the effects of increases in federal student loan caps using detailed student-level financial data. We find a pass-through effect on tuition of changes in subsidized loan maximums of about 60 cents on the dollar, and smaller but positive effects for unsubsidized federal loans. The subsidized loan effect is most pronounced for more expensive degrees, those offered by private institutions, and for two-year or vocational programs.
Cite this item
David O. Lucca & Taylor D. Nadauld & Karen Shen, Credit supply and the rise in college tuition: evidence from the expansion in federal student aid programs, Federal Reserve Bank of New York, Staff Reports 733, 01 Jul 2015, revised 01 Feb 2017.
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
Keywords: student loans; college tuition
This item with handle RePEc:fip:fednsr:733
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