aid could reduce student loan defaults without restricting prospective students' access to higher education. We examine …, market enrollment declines by just 3 percent. Finally, we provide suggestive evidence that students induced to enroll in …

We assume that students can acquire a wage premium, thanks to studies, and form a rational expectation of their future … earnings, which depends on personal ability. Students receive a private, noisy signal of their ability, and universities can … of test scores. Students optimally self-select as a result of pricing only. If capital markets are perfect but …

aid could reduce student loan defaults without restricting prospective students' access to higher education. We examine …, market enrollment declines by just 3 percent. Finally, we provide suggestive evidence that students induced to enroll in …