Score contribution per author:
α: calibrated so average coauthorship-adjusted count equals average raw count
Interest in public loans to fund (higher) education has been increasing in the last decades. This paper explores the general welfare properties of government-created credit markets for education in a three-period overlapping generations model with physical and human capital. It shows that the mere existence of public credit markets is second-best in nature, and cannot decentralize the optimum. Achieving the first-best “Golden Rule” balanced growth path requires a government loan system that lends the amounts required for optimal investments in education and an optimally chosen pure pay-as-you-go social security system. Student loans and pensions thus appear as two inseparable elements of the policy that maximizes social welfare.