Student Loan Forgiveness

101 Pages Posted: 24 Jul 2024 Last revised: 5 Feb 2025

See all articles by Michael Dinerstein

Michael Dinerstein

Duke University

Dmitri Koustas

University of Chicago

Constantine Yannelis

University of Chicago

Samuel Earnest

University of Chicago

Multiple version iconThere are 2 versions of this paper

Date Written: July 16, 2024

Abstract

Student loan forgiveness has been proposed as a means to alleviate soaring student loan burdens. This paper uses administrative credit bureau data to study the distributional, consumption, borrowing, and employment effects of the largest event of student loan forgiveness in history. Beginning in March 2021, the United States federal government ordered $132 billion in student loans cancelled, or 7.8% of the total $1.7 trillion in outstanding student debt. We estimate that forgiven borrowers’ predicted monthly earnings were $115 higher than borrowers who did not receive forgiveness and $193 more than the general population. We find that student loan forgiveness led to increases in mortgage, auto, and credit card debt by 9 cents for every dollar forgiven. Borrowers’ monthly earnings and employment fell, at increasing rates for each month post forgiveness. The implied Marginal Propensities for Consumption (MPC) and Earnings (MPE) are 0.27 and -0.49, respectively.

Suggested Citation

Dinerstein, Michael and Koustas, Dmitri and Yannelis, Constantine and Earnest, Samuel, Student Loan Forgiveness (July 16, 2024). Available at SSRN: https://ssrn.com/abstract=4899176 or http://dx.doi.org/10.2139/ssrn.4899176

Michael Dinerstein

Duke University ( email )

100 Fuqua Drive
Durham, NC 27708-0204
United States

Dmitri Koustas (Contact Author)

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Constantine Yannelis

University of Chicago ( email )

1101 East 58th Street
Chicago, IL 60637
United States

Samuel Earnest

University of Chicago ( email )

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
485
Abstract Views
1,286
Rank
120,828
PlumX Metrics