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The Effect of the Great Recession on Student Loan Borrowing and Repayment

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Abstract

We study the long-term effect of the Great Recession on federal student loan borrowing and repayment. Using detailed longitudinal data on federal student loan borrowers, we compare labor markets that faced varying degrees of unemployment severity during the economic downturn. On average, a one percentage point increase in Great Recession unemployment rates caused a 7% rise in total outstanding debt and 6% percent rise in defaulted borrowers. Across institutional sectors, the Great Recession accounted on average for between 19-32% of the total increase in undergraduate student debt and 10 25% of the total increase in defaults. Borrowers who were students at the onset of the recession saw the largest effects on accrued debt, due to delayed graduation and lengthened enrollment spells

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  • Michel Grosz & Tomás Monarrez, 2025. "The Effect of the Great Recession on Student Loan Borrowing and Repayment," Working Papers 25-13, Federal Reserve Bank of Philadelphia.
    • Handle: RePEc:fip:fedpwp:99848
    DOI: 10.21799/frbp.wp.2025.13
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    More about this item

    Keywords

    student loans; Great Recession; unemployment; higher education finance;
    All these keywords.

    JEL classification:

    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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