No. 23-19 - Job Loss, Credit Card Loans, and the College-persistence Decision of US Working Students - Abstract

Oct 15, 2026

Uploaded by Callum

This study assesses how involuntary job loss affects college persistence by comparing the timing of job-loss events relative to a working student’s enrollment decision. Job loss raises the likelihood that a working college student leaves before earning a degree. Access to short-term credit via credit card loans buffers the liquidity impact. The CARD Act of 2009 restricts credit supply, weakening persistence when earnings fall unexpectedly, strengthening job-loss effects over the last decade.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages59

Reading Time2 h 29 min

AccessFree to download

Introduction

Research objective and questions

Data and empirical strategy

No. 23-19 Job Loss, Credit Card Loans, and the College-persistence Decision of US Working Students Pinghui Wu and Lucy McMillan Abstract: This study assesses the impact of involuntary job loss on college persistence by leveraging different job-loss timings relativeto a student’s college enrollment decision. We find that job loss increases the probability that a working college student leaves college before attaining a degree, but access to short-term credit through credit card loans buffers this liquidity effect. By restricting credit supply to college students, the CARD Act of 2009 has inadvertently inhibited the ability of liquidity-constrained students to remain in college when their earnings unexpectedly fall, resulting in a stronger liquidity effect of job loss on college persistence over the last decade. JEL Classifications: I22, I23, J64 Keywords: Credit card loans, unemployment, college persistence Pinghui Wu ([Pinghui.Wu@bos.frb.org](Pinghui.Wu@bos.frb.org)) is an economist in the Federal Reserve Bank of Boston Research Department. Lucy McMillan ([Lucy.McMillan@bos.frb.org](Lucy.McMillan@bos.frb.org)) is a senior research assistant in the Federal Reserve Bank of Boston Research Department. The authors thank Lawrence Bean for editing the manuscript; Darcy Saas, Vanessa Krawczyk, and Teresa Huie for administrative support; and Henry Szeto for technical support. They thank Jeffrey Thompson and participants in the Federal Reserve Bank of Boston internal seminar for helpful comments and feedback. This paper presents preliminary analysis and results intended to stimulate discussion and critical comment. The views expressed herein are those of the authors and do not indicate concurrence by the Federal Reserve Bank of Boston, the principals of the Board of Governors, or the Federal Reserve System. This paper, which may be revised, is available on the website of the Federal Reserve Bank of Boston at [https://www.bostonfed.org/publications/research-department-working-paper.aspx](https://www.bostonfed.org/publications/research-department-working-paper.aspx). This version: October 2023 [https://doi.org/10.29412/res.wp.2023.19](https://doi.org/10.29412/res.wp.2023.19) Introduction A college education is a proven pathway to upward mobility in the United States. However, not all who start down the path reach the end. According to the US Department of Education, in 2020, only 64 percent of first-time, full-time undergraduate students at four-year institutions graduated within six years, and only 48 percent of students who began at two-year institutions graduated or transferred to another institution within three years.1 While some students dropped out of college for personal reasons or to pursue a different career goal, nearly 40 percent of young adults left college when they could no longer afford to stay.2 For many students who have limited financial resources, pursuing a college degree requires treading a thin line between attending school and holding a job so that they can pay their dayto-day expenses. Maintaining this balance can be academically and psychologically costly (Johnson et al., 2009) . On top of that, unexpected income loss or expenses can disturb the balance, forcing a student to leave college. Timely access to credit is therefore critical for the college persistence of financially constrained students, but it is not always available. The objective of this study is to gain insight into the relationship between employment, credit constraint, and the college-persistence decision of US 18-to 24-year-old working college students by investigating two interrelated research ques- 1US Department of Education, National Center for Education Statistics, Integrated Postsecondary Education Data System, Winter 2020–2021, Graduation Rates component. 2Authors’ calculation based on the Panel Study of Income Dynamics (PSID) Transition into Adulthood Supplement, 2005–2019 . Affordability-related dropou

FAQs

How does involuntary job loss affect working students’ college persistence?

Job loss increases the probability that working college students leave college before attaining a degree.

What role do credit card loans play in the effect of job loss on persistence?

Credit card loans provide short-term credit that buffers the liquidity effect of job loss.

How did the CARD Act of 2009 change the relationship between credit constraints and persistence?

By restricting credit supply to college students, the CARD Act inadvertently inhibited liquidity-constrained students from remaining in college after unexpected earnings declines, making the job-loss effect stronger over the last decade.

Oct 15, 2026

Uploaded by Callum