The Distributional Effects of Student Loan Forgiveness
58 Pages Posted: 3 Dec 2020 Last revised: 16 Apr 2021
Date Written: April 14, 2021
We study the distributional consequences of student debt forgiveness in present value terms, accounting for differences in repayment behavior across the earnings distribution. Full or partial forgiveness is regressive because high earners took larger loans, but also because, for low earners, balances greatly overstate present values. Consequently, forgiveness would benefit the top decile as much as the bottom three deciles combined. Blacks and Hispanics would also benefit substantially less than balances suggest. Enrolling households who would benefit from income-driven repayment is the least expensive and most progressive policy we consider.
Suggested Citation: Suggested Citation