Loans Hurt Optimistic Low‑Skill Students

New empirical work shows that beliefs about the probability of finishing a bachelor’s degree predict who enrolls, and that widespread optimism can make access to federal student loans welfare‑reducing for low‑skill, poor students who overestimate their chances. The paper models college as a risky investment and finds that loan availability amplifies the cost of mistaken beliefs. — If replicated, this challenges the simple assumption that broader access to federal loans is always welfare‑improving and should reshape debates over loan eligibility, counseling, and targeting.