Paying for college is often a family affair, with both parents and students contributing. We study the effects of college on family finances using administrative data on the universe of federal aid applicants in California linked to credit records.
This study provides the first comprehensive analysis of how both students and their parents use debt with college attendance and how prices affect those decisions, using an event-study framework to explore how parents’ use of debt and credit outcomes change after their child first submits a federal aid application for college enrollment.
While total debt does not change, higher-income parents shift balances from other debt to educational loans. Lower-income parents take out more education loans, experience less delinquency on non-educational debt, and see their credit scores rise.
The authors find that parents finance increases in the price of college through educational loans as well as home equity loans. Higher prices increase parental delinquency on debt. The findings highlight an important channel by which college and its rising cost may spill over into the broader financial health of families and economy.
No comments:
Post a Comment