This project seeks to shed light on the extent to which credit constraints may affect individuals choices to stay in full-time education past the age of 16 and to complete higher education (HE) qualifications in the United Kingdom, and on how this has varied between individuals born in 1958 and in 1970. The problem in identifying the pure effect of short-term credit constraints from the raw correlations observed between family income and schooling outcomes is that parental income also reflects long-run, not just short-run influences on schooling attainment.

Following Heckman and Carneiro (2003), the share of the population being credit constrained in their educational choices is defined as any residual gap that remains in the educational participation rates of individuals whose families are in the lower three quartiles of the parental income distribution compared to individuals in the top quartile, once having controlled for a large number of observed measures of early family and long-term environmental influences.

The findings from this work do not seem to point to particularly large fragments of the population being credit constrained in their educational choices, although it was found that the importance of short-term credit constraints on the staying-on decision has increased for the younger cohort. Subject to the important caveat that these patterns relate to the mid 1980s, the findings seem to suggest that policies aimed at reducing the possible impact of short-run credit constraints on educational decisions should target individuals at the age of 16 (or possibly earlier) when they are making decisions about whether or not to continue in full-time education, rather than at 18 when individuals are making Higher Education decisions.