and productivity shocks similar to the assumptions in Chatterjee, Corbae, Nakajima, and Rios-Rull (2007, Econometrica).

future (so-called debt dilution problem).

Under current law, participants in (college) student loan program must repay their loan in full regardless of whether they complete college. Dropout rate among college students from low-income background is anywhere between 33 to 50 percent. The combination of lack of family resources,...