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Author: Matsuda, Kazushige
Resulting in 1 citation.
1. Matsuda, Kazushige
Mazur, Karol
College Education and Income Contingent Loans in Equilibrium
Journal of Monetary Economics published online (5 September 2022): DOI: 10.1016/j.jmoneco.2022.08.005.
Also: https://www.sciencedirect.com/science/article/pii/S030439322200112X
Cohort(s): NLSY79, NLSY97
Publisher: Elsevier
Keyword(s): College Education; College Enrollment; Income Dynamics/Shocks; Intergenerational Patterns/Transmission; Legislation; Panel Study of Income Dynamics (PSID); Welfare

In 2009 the US government introduced a major income-contingent loans (ICLs) program for financing higher education. We investigate its welfare implications in the presence of income shocks, and endogenous dropout risk and college enrollment. While ICLs provide valuable income insurance and thereby increase college enrollment by risk averse agents, they may also lead to adverse selection of individuals with lower ability and generate a moral hazard cost of lowering educational effort and labor hours. We evaluate this insurance-incentives trade-off in a calibrated heterogeneous agent model. We show that ICLs increase welfare and that the social costs of adverse selection and moral hazard are mild.
Bibliography Citation
Matsuda, Kazushige and Karol Mazur. "College Education and Income Contingent Loans in Equilibrium." Journal of Monetary Economics published online (5 September 2022): DOI: 10.1016/j.jmoneco.2022.08.005.