When unintended effects are really unintended: depressive symptoms and other psychological effects of forgivable loan pr
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When unintended effects are really unintended: depressive symptoms and other psychological effects of forgivable loan programs for college education Javier A. Corredor 1
1
& Felipe González-Arango & Carolina Maldonado-Carreño
2
# Springer Nature B.V. 2020
Abstract
This article estimates the effects on depressive symptoms, family relationships, social support, and academic self-efficacy of participating in a forgivable loan program, using an instrumental variable (IV) estimation strategy. In particular, we estimate local average treatment effects (LATE) of program participation on these variables, using program eligibility as an instrument. In this case, estimation needs to account for endogeneity, given that not all eligible students decided to participate in the program and that variables affecting the decision to participate in the program might be related to the psychological variables being evaluated. We found negative effects on all the psychological variables. Additionally, we found that program participants were significantly more likely to move and attend elite, accredited, and more expensive universities, which explains the observed psychological symptoms. Results are interpreted in terms of the pressures that nontraditional students receiving financial aid face when adapting to college. Keywords College adaptation . Financial aid . Depressive symptoms . Social support . Academic self-efficacy . Family relationships . Instrumental variable . Loans . Mobility . Working class students . Acculturation Finding that financial aid increases college enrollment and graduation might seem obvious. However, the decision to enter and stay in college is not fully rational, and therefore it cannot be explained by models based exclusively on profit maximization (Thaler 2015). For this reason, understanding the effects of financial aid on college enrollment requires to explore less obvious questions: How are students going to feel in the college context? Are they going to feel supported and accepted? Are they going to feel happy, successful, and competent? How is * Javier A. Corredor [email protected]
1
Psychology Department, Universidad Nacional de Colombia, Cra. 30 # 45-03, Edificio 212, of. 218, Bogota, Colombia
2
School of Education, Universidad de los Andes, Bogota, Colombia
Higher Education
the sense of self-efficacy going to be affected by the new environment? This study describes the effects of a nationwide forgivable loan program on several psychological variables in a large sample of first-year college students. Specifically, this study focuses on the psychological outcomes of students participating in “Ser Pilo Paga,” a program that provided merit-based forgivable loans for tuition and living expenses to low SES students enrolled in high-quality institutions accredited by the government. To participate in the program, students should be ranked in top 9% in the national qualification exam and had to come from a household scoring below the poverty cutoff (Londoño-Velez et al. 2017). The entire
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