Taking it to the Limit: Effects of Increased Student Loan Availability on Attainment, Earnings, and Financial Well-Being

Abstract

Growing reliance on student loans and repayment difficulties have raised concerns of a student debt crisis in the United States. However, little is known about the effects of student borrowing on human capital and long-run financial well-being. We use variation induced by recent expansions in federal loan limits, together with administrative schooling, earnings, and credit records, to identify the effects of increased student borrowing on credit-constrained students’ educational attainment, earnings, debt, and loan repayment. Increased student loan availability raises student debt and improves degree completion, later-life earnings, and student loan repayment while having no effect on homeownership or other types of debt. Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.