Risky Human Capital and Alternative Bankruptcy Regimes for Student Loans
AbstractIn a heterogeneous life cycle economy with human capital accumulation, the option to discharge student loans under a liquidation regime helps alleviate some of the risk of investing in human capital. However, exclusion from borrowing is especially costly for high school graduates with low ability and human capital, for whom the gains from this insurance option are large. Replacing liquidation with reorganization induces significant allocational consequences across education groups. Overall, reorganization improves welfare relative to liquidation. Poor high school graduates with low ability and human capital benefit the most. However, an economy with partial dischargeability is desirable on welfare grounds.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Human Capital.
Volume (Year): 5 (2011)
Issue (Month): 2 ()
Pages: 153 - 206
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Web page: http://www.journals.uchicago.edu/JHC/
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- Schwager, Robert, 2012. "Student loans in a tiebout model of higher education," Center for European, Governance and Economic Development Research Discussion Papers 137, University of Goettingen, Department of Economics.
- Lance Lochner & Alexander Monge-Naranjo, 2012.
"Credit Constraints in Education,"
University of Western Ontario, CIBC Centre for Human Capital and Productivity Working Papers
20121, University of Western Ontario, CIBC Centre for Human Capital and Productivity.
- Lance Lochner & Alexander Monge-Naranjo, 2011. "Credit Constraints in Education," NBER Working Papers 17435, National Bureau of Economic Research, Inc.
- Lance Lochner & Alexander Monge-Naranjo, 2011. "Credit Constraints in Education," Working Papers 2011-036, Human Capital and Economic Opportunity Working Group.
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