Student Loan Solutions: Modeling the Financial Impacts of Income Based Repayment
Abstract/Contents
- Abstract
- Student loan debt in the United States is a major source of hardship for a large portion of the population. As of September 2019, almost 45 million Americans had outstanding student loans, many with six-figure balances, and there was over $1.5 trillion in outstanding student debt. This paper uses a Copula approach to model income dynamics for college graduates across ages. By simulating incomes for a population- representative sample of student-borrowers, I am able to estimate the financial impacts of enrolling borrowers in the incumbent Income Based Repayment (IBR) plan. I find that enrolling all borrowers who benefit from enrollment would cost the United States federal government $227 billion, which is equivalent to the cost of an 18.3 percent cumulative default rate. In addition, the paper simulates a novel Income Driven Repayment (IDR) program for new borrowers, showing that such a program benefits student borrowers. Based on these findings, I argue that debt is an inherently flawed as a way to support higher education.
Description
| Type of resource | text |
|---|---|
| Date created | May 21, 2020 |
Creators/Contributors
| Author | Chizewer, Andrew |
|---|---|
| Advisor | Admati, Anat |
Subjects
| Subject | Department of Economics |
|---|---|
| Subject | student loans |
| Subject | income-based repayment |
| Subject | copula |
| Subject | debt |
| Subject | debt-restructuring |
| Genre | Thesis |
Bibliographic information
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- License
- This work is licensed under a Creative Commons Attribution Non Commercial 3.0 Unported license (CC BY-NC).
Preferred citation
- Preferred Citation
- Andrew Chizewer. (2020). Student Loan Solutions: Modeling the Financial Impacts of Income Based Repayment. Stanford Digital Repository. Available at: https://purl.stanford.edu/fk157hr0580
Collection
Stanford University, Department of Economics, Honors Theses
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- Contact
- andrewchizewer@gmail.com
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