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Debt Moratoria: Evidence from Student Loan Forbearance

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  • Michael Dinerstein
  • Constantine Yannelis
  • Ching-Tse Chen

Abstract

We evaluate the effects of the 2020 student debt moratorium. Using administrative credit panel data, we compare borrowers whose loans were frozen to borrowers whose loans were not frozen based on whether the government owned the loans. We estimate that borrowers used the new liquidity to increase borrowing on mortgages, auto loans, and credit cards rather than avoid delinquencies. The effects are concentrated among borrowers without delinquencies, who saw no change in credit scores. The results highlight an important complementarity between liquidity and credit, as liquidity increases the demand for credit even as the supply of credit is fixed.

Suggested Citation

  • Michael Dinerstein & Constantine Yannelis & Ching-Tse Chen, 2024. "Debt Moratoria: Evidence from Student Loan Forbearance," American Economic Review: Insights, American Economic Association, vol. 6(2), pages 196-213, June.
    • Handle: RePEc:aea:aerins:v:6:y:2024:i:2:p:196-213
    DOI: 10.1257/aeri.20230032
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    Cited by:

    1. 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).
    2. Christine L. Dobridge & Joanne W. Hsu & Mike Zabek, 2024. "Personal Tax Changes and Financial Well-being: Evidence from the Tax Cuts and Jobs Act," Finance and Economics Discussion Series 2024-029, Board of Governors of the Federal Reserve System (U.S.).
    3. Michael Boutros & Nuno Clara & Francisco Gomes, 2023. "Borrow Now, Pay Even Later: A Quantitative Analysis of Student Debt Payment Plans," Staff Working Papers 23-54, Bank of Canada.
    4. Yasin Kür¸sat Önder & Mauricio Villamizar-Villegas & Jose Villegas, 2023. "Debt Moratorium: Theory and Evidence," Borradores de Economia 1253, Banco de la Republica de Colombia.
    5. 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).

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    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I23 - Health, Education, and Welfare - - Education - - - Higher Education; Research Institutions

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