This repository will serve to document the econometric methods and models that I used when conducting research for my bachelor's thesis, “Investigating the Ascendancy in Student Loan Demand through Granger-Causality”, while a student at The Florida State University.
With my paper, I participated in the 2017 APEE Undergraduate Research competition, where I presented my research in Lahaina, Hawaii in April of 2017. Below, you will find the asbtract from my paper, as well as some links relevant to my study.
One of the first lessons learned as a student of economics is the necessity of looking for the unseen and secondary effects of any potential solution when contemplating an issue. It is a common adage that well-intentioned policies can have large negative long-run effects. Indeed, it was Nobel Laureate economist Milton Friedman who said, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.” Since the Higher Education Act of 1965, when the Guaranteed Student Loan program was authorized, low-interest credit has been available to university students in need of financial assistance. While the number of students able to attend college has certainly increased in part due to the increased student aid available through federal government loan programs, to take a mere cursory glance at this figure alone does not do the subject justice. This paper will be an effort to determine the direction of causality, if present, between the demand for student loans and the rates of rent charged by residential housing. My initial prediction was that increases in residential housing rents will, on average, exert upward pressure on the demand for student loans. After running an F-type Granger-causality test, I find that the results support my hypothesis, with there being a Granger-causal effect of past values of rent on loan demand, but not vice-versa. The findings of this paper would be of use to federal officials in the US Department of Education, as well as prospective college students and parents who are interested in financial assistance in hopes of lessening the burden of college costs. In 2016, total outstanding student debt has reached $1.3 trillion in the United States, generating a fair amount of social and political commentary. More light shed on an issue that affects close to 1 in 8 Americans would do well to help in crafting policy solutions that ward off undesirable outcomes.