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Student Loans, Access to Credit, and Consumer Credit Demand

Author

Listed:
  • Alvaro Mezza
  • Daniel Ringo
  • Kamila Sommer

Abstract

This paper provides novel evidence that increased student loan debts, caused by rising tuitions, increase borrowers’ demand for additional consumer debt, while simultaneously restricting their ability to access it. The net effect of student loan debt on consumer borrowing varies by market, depending on whether the supply or demand channel dominates. In loosely underwritten credit markets, increased student loan debt causes borrowing to increase, while in tightly underwritten markets, increased student loan debt reduces credit use. These findings match predictions of a standard life cycle model of household consumption and borrowing, augmented by a realistic student loan repayment contract. (JEL G51, D15, I22, D14)

Suggested Citation

  • Alvaro Mezza & Daniel Ringo & Kamila Sommer, 2024. "Student Loans, Access to Credit, and Consumer Credit Demand," The Review of Financial Studies, Society for Financial Studies, vol. 37(12), pages 3761-3801.
    • Handle: RePEc:oup:rfinst:v:37:y:2024:i:12:p:3761-3801.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhae046
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    More about this item

    JEL classification:

    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • D15 - Microeconomics - - Household Behavior - - - Intertemporal Household Choice; Life Cycle Models and Saving
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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