Second Chance: Life without Student Debt

61 Pages Posted: 26 Apr 2019 Last revised: 29 Nov 2019

See all articles by Marco Di Maggio

Marco Di Maggio

Harvard Business School; National Bureau of Economic Research (NBER)

Ankit Kalda

Indiana University - Kelley School of Business - Department of Finance

Vincent Yao

Georgia State University - J. Mack Robinson College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: November 26, 2019

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, Private Student Loans, Legal Settlement, Mobility, Debt Collection

JEL Classification: D14, H52, H81, J24, I23

Suggested Citation

Di Maggio, Marco and Kalda, Ankit and Yao, Vincent, Second Chance: Life without Student Debt (November 26, 2019). Available at SSRN: https://ssrn.com/abstract=3376245 or http://dx.doi.org/10.2139/ssrn.3376245

Marco Di Maggio (Contact Author)

Harvard Business School ( email )

Soldiers Field
Baker Library 265
Boston, MA 02163
United States

HOME PAGE: http://https://www.hbs.edu/faculty/Pages/profile.aspx?facId=697248

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ankit Kalda

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
Bloomington, IN 47405
United States

Vincent Yao

Georgia State University - J. Mack Robinson College of Business ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

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