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The Distributional Effects of Student Loan Forgiveness

Author

Listed:
  • Sylvain Catherine
  • Constantine Yannelis

Abstract

We study the distributional consequences of student debt forgiveness in present value terms, accounting for differences in repayment behavior across the earnings distribution. Full or partial forgiveness is regressive because high earners took larger loans, but also because, for low earners, balances greatly overstate present values. Consequently, forgiveness would benefit the top decile as much as the bottom three deciles combined. Blacks and Hispanics would also benefit substantially less than balances suggest. Enrolling households who would benefit from income-driven repayment is the least expensive and most progressive policy we consider.

Suggested Citation

  • Sylvain Catherine & Constantine Yannelis, 2020. "The Distributional Effects of Student Loan Forgiveness," NBER Working Papers 28175, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:28175
    Note: AP CF ED LS PE POL
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    Citations

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    Cited by:

    1. Mallick Hossain & Igor Livshits & Collin Wardius, 2023. "Not Cashing In on Cashing Out: An Analysis of Low Cash-Out Refinance Rates," Working Papers 23-04, Federal Reserve Bank of Philadelphia.
    2. Fuente, David & Mulwa, Richard & Mwaura, Mbutu & Gitu, Josiah & Cook, Joseph, 2025. "Forgive us our sins – Experimental evidence on arrears forgiveness and bill payment from Nairobi, Kenya," EfD Discussion Paper 25-12, Environment for Development, University of Gothenburg.
    3. Pernagallo, Giuseppe, 2024. "The student funding dilemma," The Journal of Economic Asymmetries, Elsevier, vol. 30(C).
    4. Andrieș, Alin Marius & Copaciu, Anca & Popa, Radu & Vlahu, Razvan, 2025. "Recourse and (strategic) mortgage defaults: Evidence from changes in housing market laws," European Economic Review, Elsevier, vol. 173(C).
    5. Emily Moschini & Tom Phelan, 2024. "The Evolution of Student Debt 2019–2022: Evidence from the Survey of Consumer Finances," Economic Commentary, Federal Reserve Bank of Cleveland, vol. 2024(10), pages 1-6, June.
    6. Lourie, Ben & Nekrasov, Alexander & Yoo, Il Sun, 2023. "The impact of debt forbearance on borrowers’ financial behavior and labor outcomes: Evidence from student loans," Finance Research Letters, Elsevier, vol. 57(C).
    7. Boutros, Michael & Clara, Nuno & Gomes, Francisco, 2024. "Borrow now, pay even later: A quantitative analysis of student debt payment plans," Journal of Financial Economics, Elsevier, vol. 159(C).

    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G5 - Financial Economics - - Household Finance
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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