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The Insurance Implications of Government Student Loan Repayment Schemes

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  • Martin Gervais
  • Qian Liu
  • Lance Lochner

Abstract

We use new administrative data that link detailed information on Canadian student loan recipients with their repayment and income histories from the Canada Student Loans Program, income tax filings, and postsecondary schooling records to measure the extent to which student borrowers adjust loan repayments to insure against income variation. Loan payments are shown to increase in income, more so in early years and for individuals with higher initial debt. We estimate that on average an unexpected $1,000 change in annual income is associated with a $30 change in loan payment. Loan repayments are also used to absorb persistent income variation.

Suggested Citation

  • Martin Gervais & Qian Liu & Lance Lochner, 2023. "The Insurance Implications of Government Student Loan Repayment Schemes," AEA Papers and Proceedings, American Economic Association, vol. 113, pages 535-540, May.
    • Handle: RePEc:aea:apandp:v:113:y:2023:p:535-40
    DOI: 10.1257/pandp.20231082
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    1. Lance Lochner & Qian Liu & Martin Gervais, 2021. "Innis Lecture: Returns on student loans in Canada," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(4), pages 1495-1524, November.
    2. Lochner, L. & Monge-Naranjo, A., 2016. "Student Loans and Repayment," Handbook of the Economics of Education,, Elsevier.
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    More about this item

    JEL classification:

    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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