Monday, June 2, 2008

Student Loan Ailments

The Times reported today on the credit squeeze faced by borrowing students at colleges further down the food chain, presumably another result of the general credit crunch brought on by the subprime crisis.

Last summer, a similar article discussed huge debt burdens among students who had taken out private loans.

The big question is whether increasing reliance on private bank loans mixed with fluctuations in interest rates, or maybe unfortunate choices brought on by risky or myopic behavior, changes behavior or outcomes. Much research like this working paper by Jesse Rothstein and Cecilia Rouse finds impacts of debt on post-graduation choices. Is there also a matriculation or dropout effect?