The consequences of student loan credit expansions: Evidence from three decades of default cycles
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This paper studies the link between credit availability and student loan repayment using administrative federal student loan data. The authors demonstrate that expansions and contractions in federal student loan credit to institutions with high default rates explain most of the time series variation in student loan defaults between 1980 and 2010. Expansions in loan eligibility between 1976 and 1988 led to the entry of new, high-risk institutions, and default rates exceeding 30 percent in the late 1980s. Credit access was subsequently tightened through strict institutional and student accountability measures.