General Equilibrium Effects of Student Loans on the United States College Market

Siddhartha Biswas

Does the expansion of federal student loans increase college enrollment and improve students' college choice? While an expansion in student loans may help a student afford a better and more expensive college, colleges may increase tuition because they anticipate that prospective students will borrow to pay the higher tuition. If the expansion also induces a rise in tuition, the eventual cost to students could change very little, resulting in a weaker improvement in student outcomes than expected. To capture this hypothesis, I incorporate student loans into established economic theory to develop a model that (1) approximates the decision-making processes of consumers (potential students) and suppliers (colleges) of higher education in the U.S. and (2) highlights the mechanisms through which federal loans affect students' education outcomes. Using college application, enrollment, and student loan borrowing data for two cohorts of high school students and information from all colleges that participate in federal financial aid programs, I estimate key parameters that verify the model as a valid explanation of observed trends in higher education. With the estimated model, I can evaluate the effects of student borrowing limit increases in 2007 and 2008, and of two hypothetical subsidies, on the outcomes that characterize access to quality colleges and affordability: applications and enrollment for students of different socioeconomic backgrounds, and admission rates and tuition at different tiers of colleges. Therefore, this dissertation aims to compare these policies and identify one that improves students' access to quality higher education and reduces tuition growth.

About Siddhartha Biswas

Siddhartha Biswas is a Ph.D. Candidate in the Economics Department at the University of North Carolina, Chapel Hill. His primary research interests are in education and labor economics. In his dissertation, Sid examines the role of federal student loans on the market for higher education, and specifically on students' access to a quality college education. His broad research objective is to utilize economic theory and data analysis to evaluate policies and understand behaviors and outcomes relevant to young adults, including financial constraints to education, determinants of college enrollment, and student mental health. Before entering graduate school, Sid worked as a research professional for the Center for the Economics of Human Development at the University of Chicago, where he studied the interactions of education, health, and wealth over an individual's lifecycle as well as the relationship between tax policies, income inequality, and economic growth. He also worked as a senior analyst for the management consulting firm A.T. Kearney. Sid holds a B.A. and B.S in Mathematics and Economics from the University of Chicago, and a M.S. in Economics from UNC.