IDEAS home Printed from https://ideas.repec.org/a/sae/anname/v671y2017i1p249-268.html
   My bibliography  Save this article

Conceptual and Empirical Issues for Alternative Student Loan Designs: The Significance of Loan Repayment Burdens for the United States

Author

Listed:
  • Bruce Chapman
  • Lorraine Dearden

Abstract

In this article, we compare the two main types of student loans used to finance postsecondary education: mortgage-type loans, which are repaid over a set period of time and mainly used in the United States; and income-contingent loans, which are repaid depending on students’ future income and used in Australia and England. We argue that the major concern with mortgage-type loans is the repayment burden that falls on students. Repayment burden—the proportion of a debtor’s income required to repay loans—is fundamental to the assessment of student loan systems because it affects the probability of students defaulting on loan repayment, and because it bears on debtors’ consumption and standard of living. We show that Stafford loans imply extremely difficult financial circumstances for a minority of U.S. loan recipients, and that income-contingent loans can solve those problems. The financial benefits of income-contingent loans are illustrated through a hypothetical student loan experience.

Suggested Citation

  • Bruce Chapman & Lorraine Dearden, 2017. "Conceptual and Empirical Issues for Alternative Student Loan Designs: The Significance of Loan Repayment Burdens for the United States," The ANNALS of the American Academy of Political and Social Science, , vol. 671(1), pages 249-268, May.
    • Handle: RePEc:sae:anname:v:671:y:2017:i:1:p:249-268
    DOI: 10.1177/0002716217703969
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0002716217703969
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0002716217703969?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Joseph E. Stiglitz, 2014. "Remarks on Income Contingent Loans: How Effective can they be at Mitigating Risk?," International Economic Association Series, in: Bruce Chapman & Timothy Higgins & Joseph E. Stiglitz (ed.), Income Contingent Loans, chapter 2, pages 31-38, Palgrave Macmillan.
    2. Lance Lochner & Alexander Monge-Naranjo, 2014. "Student Loans and Repayment: Theory, Evidence and Policy," Working Papers 2014-40, Federal Reserve Bank of St. Louis.
    3. Adam Looney & Constantine Yannelis, 2015. "A Crisis in Student Loans? How Changes in the Characteristics of Borrowers and in the Institutions They Attended Contributed to Rising Loan Defaults," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(2 (Fall)), pages 1-89.
    4. Schwartz, S. & Finnie, R., 2002. "Student loans in Canada: an analysis of borrowing and repayment," Economics of Education Review, Elsevier, vol. 21(5), pages 497-512, October.
    5. Dynarski, Mark, 1994. "Who defaults on student loans? Findings from the National Postsecondary Student Aid Study," Economics of Education Review, Elsevier, vol. 13(1), pages 55-68, March.
    6. Bruce Chapman & Timothy Higgins & Joseph E. Stiglitz (ed.), 2014. "Income Contingent Loans," International Economic Association Series, Palgrave Macmillan, number 978-1-137-41320-8, December.
    7. Chapman, Bruce & Liu, Amy Y.C., 2013. "Repayment burdens of student loans for Vietnamese higher education," Economics of Education Review, Elsevier, vol. 37(C), pages 298-308.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Michael B. Charles & Marcus Harmes & Michael A. Kortt, 2022. "Is it Time to Rationalise Humanities Education in Australian Public Universities?," Economic Papers, The Economic Society of Australia, vol. 41(3), pages 202-214, September.
    2. Ege Aksu & Sidhya Balakrishnan & Eric Bettinger & Jonathan S. Hartley & Michael S. Kofoed & Dubravka Ritter & Douglas A. Webber, 2024. "Navigating Higher Education Insurance: An Experimental Study on Demand and Adverse Selection"," Working Papers 24-07, Federal Reserve Bank of Philadelphia.
    3. Yasmeen Ansari & Mansour Saleh Albarrak & Noorjahan Sherfudeen & Arfia Aman, 2022. "A Study of Financial Literacy of Investors—A Bibliometric Analysis," IJFS, MDPI, vol. 10(2), pages 1-16, May.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chapman, Bruce & Doris, Aedín, 2019. "Modelling higher education financing reform for Ireland," Economics of Education Review, Elsevier, vol. 71(C), pages 109-119.
    2. Bruce Chapman & Lorraine Dearden, 2022. "Income-contingent loans in higher education financing," IZA World of Labor, Institute of Labor Economics (IZA), pages 227-227, October.
    3. repec:hka:wpaper:2013-20 is not listed on IDEAS
    4. Joselynn Hawkins Fountain, 2019. "The Effect of the Gainful Employment Regulatory Uncertainty on Student Enrollment at For-Profit Institutions of Higher Education," Research in Higher Education, Springer;Association for Institutional Research, vol. 60(8), pages 1065-1089, December.
    5. Kenneth G. H. Baldwin & Bruce Chapman & Umbu Raya, 2015. "Using Income Contingent Loans for the Financing of the Next Million Australian Solar Rooftops," CCEP Working Papers 1508, Centre for Climate & Energy Policy, Crawford School of Public Policy, The Australian National University.
    6. Elliott, William & Friedline, Terri, 2013. "“You pay your share, we’ll pay our share”: The college cost burden and the role of race, income, and college assets," Economics of Education Review, Elsevier, vol. 33(C), pages 134-153.
    7. Bruce Chapman & Kiatanantha Lounkaewa, 2010. "Repayment Burdens with US College Loans," CEPR Discussion Papers 647, Centre for Economic Policy Research, Research School of Economics, Australian National University.
    8. Lance J. Lochner & Alexander Monge-Naranjo, 2014. "Default and Repayment Among Baccalaureate Degree Earners," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20141, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    9. Abraham, Katharine G. & Filiz-Ozbay, Emel & Ozbay, Erkut Y. & Turner, Lesley J., 2020. "Framing effects, earnings expectations, and the design of student loan repayment schemes," Journal of Public Economics, Elsevier, vol. 183(C).
    10. Rajeev Darolia & Dubravka Ritter, 2020. "Strategic Default Among Private Student Loan Debtors: Evidence from Bankruptcy Reform," Education Finance and Policy, MIT Press, vol. 15(3), pages 487-517, Summer.
    11. Holger M. Mueller & Constantine Yannelis, 2017. "Students in Distress: Labor Market Shocks, Student Loan Default, and Federal Insurance Programs," NBER Working Papers 23284, National Bureau of Economic Research, Inc.
    12. Natalie Cox, 2017. "Pricing, Selection, and Welfare in the Student Loan Market: Evidence from Borrower Repayment Decisions," Working Papers 2017-2, Princeton University. Economics Department..
    13. Gareth Bryant & Ben Spies-Butcher, 2020. "Bringing finance inside the state: How income-contingent loans blur the boundaries between debt and tax," Environment and Planning A, , vol. 52(1), pages 111-129, February.
    14. Lance Lochner & Todd Stinebrickner & Utky Suleymanoglu, 2013. "The Importance of Financial Resources for Student Loan Repayment," University of Western Ontario, Centre for Human Capital and Productivity (CHCP) Working Papers 20137, University of Western Ontario, Centre for Human Capital and Productivity (CHCP).
    15. Barr, Nicholas & Chapman, Bruce & Dearden, Lorraine & Dynarski, Susan, 2019. "The US college loans system: Lessons from Australia and England," Economics of Education Review, Elsevier, vol. 71(C), pages 32-48.
    16. Ji, Yan, 2021. "Job Search under Debt: Aggregate Implications of Student Loans," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 741-759.
    17. Lance Lochner & Todd Stinebrickner & Utku Suleymanoglu, 2021. "Parental Support, Savings, and Student Loan Repayment," American Economic Journal: Economic Policy, American Economic Association, vol. 13(1), pages 329-371, February.
    18. Lau, Christopher V., 2020. "Are federal student loan accountability regulations effective?," Economics of Education Review, Elsevier, vol. 75(C).
    19. Lance Lochner & Alexander Monge-Naranjo, 2014. "Student Loans and Repayment: Theory, Evidence and Policy," Working Papers 2014-40, Federal Reserve Bank of St. Louis.
    20. Looney, Adam & Yannelis, Constantine, 2019. "How useful are default rates? Borrowers with large balances and student loan repayment," Economics of Education Review, Elsevier, vol. 71(C), pages 135-145.
    21. Long, Ngo Van, 2019. "Financing higher education in an imperfect world," Economics of Education Review, Elsevier, vol. 71(C), pages 23-31.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:anname:v:671:y:2017:i:1:p:249-268. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.