🚨🚨New Working Paper🚨🚨 "PLUS or Minus? The Effect of Graduate School Loans on Access, Attainment, and Prices" with @Econ_Sandy and Lesley Turner What happened when student loan limits for graduate school were essentially uncapped? nber.org/papers/w31291?…
In 2006, a new federal loan program for Graduate School was introduced, Grad PLUS. This allowed students to borrow up to the cost of attendance (which includes tuition but also living expenses) We ask, did this increase enrollment in grad school? Graduation? Earnings? Prices?
Using Texas administrative data, we compare programs that were more and less expensive before and after Grad PLUS and found that students did not increase their enrollment in expensive programs. It also did not increase enrollment among under represented students
Next, we see how this affected students using a strategy very similar to our paper on undergrads. We do find that it increased borrowing overall (~3500) for constrained students and decreased borrowing from private/state sources. We don't find any increase in graduation.
We also look at earnings and don't find strong positive effects but there are some caveats on our earnings measures (see paper for details)
Last we look at prices in a test of the Bennett Hypothesis, did they increase in response to additional loans? We compare programs with a lot of student borrowing at the federal maximum before the policy to programs with fewer students borrowing at the max.
Prices increased almost dollar for dollar with new Grad Plus loans. We also show that grants increased by about 1/3 as much as prices, so net price grew by 64%
We test to see if there were any differences in grant increases for different student groups to test for price discrimination and do not see strong patterns. We see some (marginally significant) evidence that grants increase more for white/Asian students relative to URM students