Fed Research Finds State Support for Higher Education Lowers Student Debt Originations, Shortens Time to Degree

New research from the Federal Reserve Bank of New York finds that increases in state appropriations lowers student debt originations and reduces time to degree. Key takeaways from the research:

• “For four-year students, we find that state appropriation increases lead to substantially lower student debt originations. They also react to appropriation increases by shortening their time to degree, but we find little effect on other outcomes.”
• “State support also leads to more car and home ownership with lower adverse debt outcomes, and these students experience substantial increases in their credit score and in the affluence of the neighborhood in which they live.”
• “Examining mechanisms, we find state appropriations are passed on to students in the form of lower tuition in the four-year sector with no institutional spending response.”