ERIC Number: ED501971
Record Type: Non-Journal
Publication Date: 2008-Apr
Abstractor: As Provided
Reference Count: 0
The Nature of Credit Constraints and Human Capital. NBER Working Paper No. 13912
Lochner, Lance J.; Monge-Naranjo, Alexander
National Bureau of Economic Research
This paper studies the nature and impact of credit constraints in the market for human capital. We derive endogenous constraints from the design of government student loan programs and from the limited repayment incentives in private lending markets. These constraints imply cross-sectional patterns for schooling, ability, and family income that are consistent with U.S. data. This contrasts with the standard exogenous constraint model, which predicts a counterfactual negative ability--schooling relationship for low-income youth. We show that the rising empirical importance of familial wealth and income in determining college attendance (Belley and Lochner 2007) is consistent with increasingly binding credit constraints in the face of rising tuition costs and returns to schooling. Our framework also explains the recent increase in private credit for college as a market response to the rising returns to school.
Descriptors: Human Capital, Student Loan Programs, Family Income, College Attendance, Credit (Finance), Tuition, Family Financial Resources, Private Sector, Economics, Paying for College, Financial Problems, Low Income, Educational Trends, Socioeconomic Influences, Access to Education, Student Costs, Student Financial Aid, Federal Programs
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Publication Type: Reports - Descriptive
Education Level: Higher Education; Postsecondary Education
Authoring Institution: National Bureau of Economic Research, Cambridge, MA.