Student Loan Relief Programs: Implications for Borrowers and the Federal Government

37 Pages Posted: 10 Nov 2016

See all articles by Wenhua Di

Wenhua Di

Federal Reserve Bank of Dallas

Kelly D. Edmiston

Center for Insurance Policy & Research / NAIC; University of Kansas - School of Medicine; University of Missouri; Baker University

Date Written: 2016-11-01

Abstract

As college costs increase and more students fund their education through borrowing, debt load and delinquency rates have become significant problems on a number of levels. Student loan obligations are challenging to manage for new graduates with lower earnings and borrowers in financial hardship. This paper discusses the federal student loan repayment relief programs that are available and estimates their borrower and fiscal impacts. The implications of relief plans on borrowers’ costs and the federal budget vary for different loan amounts, income levels, and relief program. {{p}} It is challenging for policymakers to design programs that adequately balance the risks between borrowers and taxpayers. Existing programs are also tremendously complicated, making it difficult for borrowers to make informed decisions on repayment programs. This paper examines how the various programs work in practice and considers their likely outcomes over a set of income-debt-program scenarios to bring much needed clarity to the repayment environment. In our analysis, lower-income borrowers and borrowers who will have significant remaining balance forgiven at the end of the required repayment period are generally more likely to benefit from student loan relief programs, but participation of these borrowers can be very costly from a fiscal perspective.

Keywords: student loan, repayment, relief programs, fiscal impact

Suggested Citation

Di, Wenhua and Edmiston, Kelly D., Student Loan Relief Programs: Implications for Borrowers and the Federal Government (2016-11-01). FRB of Dallas Working Paper No. 1609, Available at SSRN: https://ssrn.com/abstract=2866844 or http://dx.doi.org/10.24149/wp1609

Wenhua Di (Contact Author)

Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
Dallas, TX 75201
United States

HOME PAGE: http://www.dallasfed.org/research/economists/di.cfm

Kelly D. Edmiston

Center for Insurance Policy & Research / NAIC ( email )

1100 Walnut Street
Suite 1500
Kansas City, MO 641056
United States
8167838067 (Phone)

HOME PAGE: http://https://www.naic.org

University of Kansas - School of Medicine ( email )

3901 Rainbow Boulevard
Kansas City, KS 66160
United States

University of Missouri ( email )

Columbia, MO 65203
United States

Baker University ( email )

Baldwin City, KS
United States

HOME PAGE: http://https://www.bakeru.edu

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