Fewer cards, less credit: The role of student loans in credit access, generally and among racial and ethnic groups

Abstract In this paper, we study how a creditor evaluates student loan holdings in credit supply decisions. Using the Federal Reserve’s Survey of Consumer Finances data from 2004 to 2022, we examine the SCF data to find borrowers with student loans, and we determine how much they owe. We then estimate their relationships with credit card limits and credit-request rejection rates. African-American and Hispanic federal student loan borrowers are more limited in access to unsecured credit, compared with similarly-situated Caucasian borrowers. In particular, African-American federal student loan holders have significantly lower credit limits than other student loan holders, leading to concerns about the costs of some educational institutions, such as for-profit colleges, in reducing the number of and limits on credit cards offered to student loan borrowers. Generally, we find that student loan holders have a higher probability to be rejected for credit requests.