Loans, insurance and failures in the credit market for students

Arbeitspapier

In the education literature, it is generally acknowledged that both credit and insurance for students are rationed. In order to provide a rationale for these observations, we present a model with perfectly competitive banks and risk averse students who have private information on their ability to learn and can decide to default on debt. We show that the combination of ex-post moral hazard and adverse selection produces credit market rationing when default penalties are low. When default penalties increase, the level of student risk aversion proves crucial in determining the market outcome. If risk aversion is low, banks offer non-insuring pooling contracts at equilibrium that may result in overinvestment in education. If student risk aversion is high, high ability students are separated and student loan contracts involve a limited amount of insurance.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 3410

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Asymmetric and Private Information; Mechanism Design ; Educational Finance; Financial Aid
• Thema: ex-post moral hazard ; adverse selection ; income contingent loans ; Studienfinanzierung ; Kreditrationierung ; Kreditsicherung ; Studierende ; Risikopräferenz ; Moral Hazard ; Adverse Selection ; Theorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Del Rey, Elena ; Verheyden, Bertrand
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2011

Weitere Informationen

• Handle: http://hdl.handle.net/10419/46293
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ