Author(s)
Felicia Ionescu

I quantify the effects of alternative student loan policies on college enrollment, borrowing behavior, and default rates in a heterogeneous model of life-cycle earnings and human capital accumulation. I find that the combination of learning ability and initial stock of human capital drives the decision to enroll in college, while parental wealth has minimal effects on enrollment. Repayment flexibility increases enrollment significantly, whereas relaxation of eligibility requirements has little effect on enrollment or default rates. The former policy benefits low-income households, while the latter has negligible effects on these households

Publication Type
Article
Journal
Review of Economic Dynamics
Volume
12
Issue Number
1
Pages
205-231
JEL Codes
D91: Intertemporal Consumer Choice; Life Cycle Models and Saving
E44: Financial Markets and the Macroeconomy
J24: Human Capital; Skills; Occupational Choice; Labor Productivity
I28: Education: Government Policy