Estimating the Effect of Losing the Federal Loan Subsidy on Debt Accumulation for Law and Professional Students in the United States: Evidence From a Natural Experiment

• In Event: Marriott Roundtable Session 6
  In Roundtable Session: Critical Perspectives on Federal Policy

Abstract

This study analyzes the effect of a recent policy change, the Budget Control Act of 2011, that eliminated the federal student loan interest subsidy. The loss of subsidized loan eligibility meant that professional and Law students’ interest accrues on all Stafford loans while still in school, which we hypothesize drastically increased their overall debt accumulation/burden. This study is timely and relevant given that today's college-goers are the most indebted students in the country’s history. Second, there is almost no evidence about determinants of debt levels for graduate and/or professional students. Model estimation relies on difference-in-differences and NPSAS (07-08, 11-12, 15-16) data. Preliminary results indicate that Law students’ reliance on Stafford support increased by more than $5000 dollars before policy implementation.

Authors

• Manuel S. Gonzalez Canche, University of Pennsylvania

• Jason Clark Lee, University of Georgia

• Jeffrey Harding, University of Georgia - Athens