Work

Second Chance: Life with Less Student Debt

Year: 2025

Type: article

Abstract: ABSTRACT We exploit an episode of plausibly random debt discharge due to the loss of paperwork for thousands of defaulted borrowers to examine the effects of private student debt relief on borrower outcomes. We find that borrowers who receive debt relief (treated) experience declines in debt balances and delinquency rates on other accounts, and increases in mobility and income relative to those who bear the costs of default like wage garnishment and collections (control). Borrowers in both groups contribute to our findings through different mechanisms. While our estimates may not directly apply to blanket student loan forgiveness, they speak to the benefits of forgiveness in reducing the consequences of debt burden for distressed borrowers.

Source: The Journal of Finance

DOI: 10.1111/jofi.70002

Authors: MARCO DI MAGGIO, ANKIT KALDA, VINCENT YAO

Institutions: Georgia State University, Indiana University, Indiana University Bloomington

Language: English

Topic: Financial Literacy, Pension, Retirement Analysis

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: No poverty, Reduced inequalities

Open Access status: hybrid

Estimated APC paid: $4,430