Maxed Out?

Abstract

Despite growing student loans, little evidence exists on the effects of access to student loans on borrowing and educational outcomes. We examine these effects by using policy variation in the maximum federal student loan borrowing limits. In particular, first-, second-, and third-year students have access to different amounts of federal loans. Using a regression discontinuity and administrative data from a state higher education system, we find that access to higher loan limits increases borrowing for at least 26 percent of borrowers. Despite this increase, we find no evidence that eligibility for loans affects student GPA, credits, persistence, or graduation.