Working Paper: NBER ID: w25810
Authors: Marco Di Maggio; Ankit Kalda; Vincent Yao
Abstract: We exploit an episode of plausibly-random debt discharge, due to the inability of National Collegiate to prove chain of title, to examine the effects of student debt relief on individual credit and labor market outcomes. We find that borrowers experiencing this debt relief shock reduce their indebtedness by 11%, and number of other delinquent accounts by 24%. After the discharge, we see increases in the borrowers' geographical mobility, probability of changing jobs, and ultimately their income, which increases by about $3000 over a three year period. Although we cannot quantify its costs, these findings speak to the benefits of loan forgiveness in reducing the consequences of debt overhang.
Keywords: student debt; debt relief; credit outcomes; labor market outcomes
JEL Codes: D14; H52; H81; I23; J24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| debt relief shock (F34) | reduction in overall indebtedness (G32) |
| debt relief shock (F34) | reduction in number of delinquent accounts (G33) |
| debt relief (F34) | increased geographical mobility (J62) |
| debt relief (F34) | increase in income (E25) |
| debt relief (F34) | increase in credit scores (G51) |
| debt relief (F34) | reduced delinquency rates (K35) |
| debt relief (F34) | increased employment opportunities (J68) |
| debt relief (F34) | positive effects on delinquency and credit scores (G51) |