Assessing the efficacy of debt forgiveness incentives in promoting higher education outcomes
Think tank: CEPEO
Author(s): German Pulido
March 25, 2025
This report from UK think tank CEPEO examines the impact of debt forgiveness in promoting higher education outcomes.
This paper examines the impact of a debt forgiveness program implemented in 2011 on education and labour market outcomes for student loan holders who pursued university education in Colombia.
The policy generated a sharp discontinuity in the eligibility criteria, which I exploit to identify the causal effect of debt forgiveness. Regression discontinuity estimates indicate an increase of 10 percentage points, equivalent to 19.5 percent, in the graduation rate of marginally eligible students. Additionally, the probability of graduating on time (within five years of enrolment) increased by 7.2 percentage points (25.4 percent).
There is evidence that the policy had an effect on labour market outcomes. Eight years post-enrolment, eligible students are 19.5 percent more likely to be employed in the formal sector and have higher earnings.
