When unintended effects are really unintended: depressive symptoms and other psychological effects of forgivable loan programs for college education

This article estimates the effects on depressive symptoms, family relationships, social support, and academic self-efficacy of participating in a forgivable loan program, using an instrumental variable (IV) estimation strategy. In particular, we estimate local average treatment effects (LATE) of program participation on these variables, using program eligibility as an instrument. In this case, estimation needs to account for endogeneity, given that not all eligible students decided to participate in the program and that variables affecting the decision to participate in the program might be related to the psychological variables being evaluated. We found negative effects on all the psychological variables. Additionally, we found that program participants were significantly more likely to move and attend elite, accredited, and more expensive universities, which explains the observed psychological symptoms. Results are interpreted in terms of the pressures that non-traditional students receiving financial aid face when adapting to college.