American Economic Journal: Applied Economics
no. 1, January 2023
In the United States, most student loans follow a fixed payment schedule that falls early in borrowers' careers. This structure provides no insurance against earnings risk and may increase student loan defaults. Income-driven repayment (IDR) plans are designed to help distressed student borrowers by lowering their monthly payments to a share of income. Using random variation in a loan servicer's automatic dialing system, I find that IDR reduces delinquencies by 22 percentage points and decreases outstanding balances within eight months of take-up. I find suggestive long-run impacts on borrower credit scores, mortgage-holding rates, and other measures of financial health.
"The Impact of Income-Driven Repayment on Student Borrower Outcomes."
American Economic Journal: Applied Economics,
Pension Funds; Non-bank Financial Institutions; Financial Instruments; Institutional Investors
Household Finance: Household Saving, Borrowing, Debt, and Wealth
National Government Expenditures and Education
Educational Finance; Financial Aid