The Effects of Credit Rationing on Reenrollment Rates at the University of Cape Town, South Africa

• In Event: 34.098 - Sheraton Roundtable Session Four - Osgoode Ballroom
  In Roundtable Session: 34.098-3 - College Expectations, Regional Compacts, and Income-Driven Repayment: The Role of Finances in Student Behavior

Abstract

How important are credit constraints for college enrollment in South Africa? We use institutional data to measure the impact of credit rationing on re-enrollment rates at the University of Cape Town, South Africa. Identifying variation is obtained from a policy change in the eligibility requirements for continued financial aid that occurred in 2015. Our difference-in-differences estimate is -0.074. We further test whether the policy had heterogenous effects for relatively lower income students, proxied by those on state funding. Our findings suggest that credit constraints are binding on the decision to re-enroll, but only for a relatively small proportion of the students who were affected by the change in the policy.

Authors

• Nicola Branson, The University of Cape Town

• Vimal Ranchhod, University of Michigan