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Framing Effects Earnings Expectations And The Design Of Student Loan Repayment Schemes
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Book Synopsis Framing Effects, Earnings Expectations, and the Design of Student Loan Repayment Schemes by : Katharine G. Abraham
Download or read book Framing Effects, Earnings Expectations, and the Design of Student Loan Repayment Schemes written by Katharine G. Abraham and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Income-driven student loan repayment (IDR) plans provide protection against unaffordable loan payments and default by linking loan payments to borrowers' earnings. Despite the advantages IDR would offer to many borrowers, take-up remains low. We investigate how take-up is affected by the framing of IDR through a survey of University of Maryland undergraduates. When the insurance aspects of IDR are emphasized, students are significantly more likely to participate, while participation is significantly lower when costs are emphasized. IDR framing interacts with expected labor market outcomes. Emphasizing the insurance aspects of IDR has larger effects on students who anticipate a higher probability of not being employed and/or low earnings at graduation. In contrast, when costs are emphasized, IDR take-up is uncorrelated with students' expected labor market outcomes. Simulation results suggest that a simple change in the framing of IDR could generate substantial reductions in loan defaults with little cost to long-run federal revenue.
Book Synopsis Student Loans and the Dynamics of Debt by : Brad Hershbein
Download or read book Student Loans and the Dynamics of Debt written by Brad Hershbein and published by W.E. Upjohn Institute. This book was released on 2015-02-23 with total page 484 pages. Available in PDF, EPUB and Kindle. Book excerpt: The papers included in this volume represent the most current research and knowledge available about student loans and repayment. It serves as a valuable reference for researchers and policymakers who seek a deeper understanding of how, why, and which students borrow for their postsecondary education; how this borrowing may affect later decisions; and what measures can help borrowers repay their loans successfully.
Book Synopsis Oppressed by Debt by : Saul Schwartz
Download or read book Oppressed by Debt written by Saul Schwartz and published by Routledge. This book was released on 2021-12-30 with total page 142 pages. Available in PDF, EPUB and Kindle. Book excerpt: This edited collection brings together essays that explore personal debts to government. Intensive collection efforts by governments in need of revenue often cause hardship, whether it is the poor in the United States going to jail because of unpaid fines, low-income English people being evicted because they paid their council taxes but could then not pay their rent, or poor former students having tax refunds or social benefits taken by the government when they have defaulted on their student loans. Student loans, fines and fees arising from the justice system, benefit overpayments and unpaid taxes have all ballooned in the past decade, but no other volume comprehensively addresses the various ways in which governments have become privileged creditors, using their power to collect debts owed to them by their citizens. With each essay emphasizing a particular kind of debt to government, the book focuses on what happens when citizens cannot pay the debts they owe to their governments. Contributors offer pragmatic options to facilitate a movement to soften the stance of governments toward those who owe them money. The insights in this collection will be of relevance to students and academics in criminology, sociology, public policy, and economics, as well as policymakers and government officials interested in effecting change in this area.
Book Synopsis Behavioral Effects of Student Loan Repayment Plan Options on Borrowers' Career Decisions by : Katharine G. Abraham
Download or read book Behavioral Effects of Student Loan Repayment Plan Options on Borrowers' Career Decisions written by Katharine G. Abraham and published by . This book was released on 2018 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the effects of available student loan repayment plans on borrowers’ career choices. By removing the risk of loan default, income driven repayment (IDR) plans make higher-paying but riskier jobs more attractive to those with moderate skill levels. We present experimental evidence that student loan recipients consider the repayment plans offered to them as well as the plans available to other borrowers as a reference in their evaluations of loans and careers. Emotions such as regret over a choice that turns out to be suboptimal ex post and relief at being unburdened from having to make a choice that could turn out badly play significant roles in borrowers’ career choices. Compared to giving borrowers a choice between a standard loan repayment plan that requires a fixed amount to be repaid over a shorter period and an IDR plan that protects borrowers from default by linking payments to income, offering only the IDR plan generates notable benefits. Removing the standard plan from borrowers’ choice sets makes remunerative but risky careers more appealing to borrowers and raises their expected net income. Moreover, these effects are strongest when borrowers holding different plans coexist in the population, as in this environment relief from the possibility of being exposed to a regret-triggering situation is most salient.
Book Synopsis How College Students Succeed by : Nicholas A. Bowman
Download or read book How College Students Succeed written by Nicholas A. Bowman and published by Taylor & Francis. This book was released on 2023-07-03 with total page 300 pages. Available in PDF, EPUB and Kindle. Book excerpt: Receiving a college education has perhaps never been more important than it is today. While its personal, societal, and overall economic benefits are well documented, too many college students fail to complete their postsecondary education. As colleges and universities are investing substantial resources into efforts to counter these attrition rates and increase retention, they are mostly unaware of the robust literature on student success that is often bounded in disciplinary silos. The purpose of this book is to bring together in a single volume the extensive knowledge on college student success. It includes seven chapters from authors who each synthesize the literature from their own field of study, or perspective. Each describes the theories, models, and concepts they use; summarizes the key findings from their research; and provides implications for practice, policy, and/or research. The disciplinary chapters offer perspectives from higher education, public policy, behavioral economics, social psychology, STEM, sociology, and critical and post-structural theory.
Book Synopsis The Insurance Implications of Government Student Loan Repayment Schemes by : Martin Gervais
Download or read book The Insurance Implications of Government Student Loan Repayment Schemes written by Martin Gervais and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use new administrative data that links detailed information on Canadian student loan recipients with their repayment and income histories from the Canada Student Loans Program (CSLP), income tax filings, and post-secondary schooling records to measure the extent to which student borrowers adjust loan repayments to insure against income variation. Several mechanisms are available for students to adjust loan repayments in response to income fluctuations: formal, like CSLP's Repayment Assistance Plan; and informal, such as delinquency or default. Borrowers can also make larger payments than required should they experience unexpectedly high income. Indeed, loan payments are shown to increase in income, more so in early years and for individuals with higher initial debt. More formally, we estimate that on average, an unexpected $1,000 change in year-over-year income is associated with a $30 change in loan payment: from a $50 change the year after graduation, declining to a $20 change 5 years after graduation. Loan repayments are also used to absorb income variation that is more permanent in nature: for borrowers whose income is consistently below or above expected income at graduation, the magnitude of average repayment adjustment is similar to the average yearly response.
Book Synopsis Creating an Income-Driven Repayment Structure for Defaulted Loans by : Persis Yu
Download or read book Creating an Income-Driven Repayment Structure for Defaulted Loans written by Persis Yu and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Before the COVID-19 pandemic, there were approximately 7.7 million student loan borrowers in default on approximately $168 billion in federally-held student loans, including Federal Family Education Loans (“FFEL”) and Direct loans. Though borrowers have in theory been able to get out of default since March 2020 through rehabilitation or consolidation, these numbers have hardly budged. In 2019, the last year before collections were paused due to the ongoing COVID-19 pandemic, total defaulted student loan receivables (principal and interest) serviced by the Department of Education's Default Resolution Group were approximately $185.1 billion. Collections that same year were approximately $14.5 billion. Difficulties with student loan repayment are unevenly distributed. Student loan borrowers in default and subject to collections are disproportionately likely to be from low-income backgrounds and communities of color, older, single, and living in severe financial precarity. Borrowers in default are disproportionately likely to be Black; one study has estimated that “nearly half of all Black students (49 percent) defaulted on at least one loan within 12 years--more than twice the rate of white students (20 percent) and more than four times the rate of Asian students (11 percent).” Borrowers in default are also less likely to have graduated from college than the median borrower, and so are correspondingly less likely to have experienced the income benefits of having a college degree. Student loan borrowers who attended for-profit institutions are also more likely to default than borrowers who attended private non-profit or public institutions. The U.S. Department of Education (“Department”) collects billions of dollars from borrowers in default every year through wage garnishment, tax refund offsets, and federal benefits offsets. These borrowers often rely on federal benefits, wages, and tax refunds to pay for basic necessities such as housing, food, transportation, clothing, childcare, and health care costs. Collections often push these borrowers over the financial brink. Indeed, most borrowers in default have incomes that make them eligible for a low or zero dollar per month income-driven repayment (“IDR”) plan. But many qualified borrowers never accessed IDR due to servicer misconduct or neglect. One of the many troublesome aspects of the debt collection system is the sheer amount that is collected from defaulted borrowers relative to their incomes. Perversely, the default system is designed such that many defaulted borrowers pay significantly higher sums through wage garnishment, benefit garnishment, and tax refund offsets than they would if they were on an IDR plan. Since 1992, the Department has regularly recognized through the creation of its IDR plans that student loan payments based on outstanding loan balance are simply unaffordable for a significant contingent of borrowers, and that time-limited repayment plans based on a borrower's income are more manageable, affordable, and thereby less likely to lead borrowers to default. While IDR plans have been expanded such that they are theoretically available to all borrowers, policy design failures and student loan servicer misconduct have combined to keep borrowers from accessing IDR at all or remaining in these plans over the long-term. Troublingly, Black borrowers in particular are more likely to fall into default without ever accessing IDR. In short, the same “struggling borrowers” that IDR plans are meant to help but fail to assist are ultimately those who default and from whom the Department collects enormous sums of money. Consider the experiences of Ms. Smith, an elderly, disabled, Black woman living on fixed Social Security retirement benefits of $1,800 per month. She suffers from severe back pain, fibromyalgia, and chronic depression. In 2019, Ms. Smith owed around $240,000 on a Federal Family Education Loan (“FFEL”) Consolidated loan. Her loans were on a repayment plan with a $2,100 monthly payment, which she had never been able to afford. Between July 2010 and March 2015, she called her loan servicer five times and told it that she could not afford her monthly payments. Each time her loan servicer put her on forbearance. She finally defaulted in July 2015, and experienced tax refund offsets of money she needed to survive. She rehabilitated her loan out of default in February 2019. At this time, she sought legal aid's help. They immediately submitted an IDR request which was granted, with a $0 monthly payment. The student loan system also failed Ned, a retired, partially disabled, Black veteran. Circa 1990, Ned's employer told him he had to attend a 6-week course at a truck driving school if he wanted to keep his job as a truck driver. He ended up having to take out around $3,000 in federal student loans, and did not learn anything from the course. Ned is now 68 and his loans have ballooned to almost $7,000. He does not have internet access or email. He was unable to keep up with the payments and defaulted in 2008. Ned has had over $7,600 garnished from his tax refund since then--it has all gone towards fees and interest with none applied to the principal balance. A retiree living primarily on Supplemental Security Income, Ned has qualified for a $0 IDR plan for years, which his servicer never told him about. He did not enter such a plan until late 2019 when a legal services organization contacted his servicer to get him out of default and onto an IDR plan, after over a decade of being in default. These experiences are commonplace. We propose several solutions to correct for this policy failure, and in particular urge the Department to (1) amend its regulations to dispense with the acceleration of defaulted debts and (2) reform the amount that is collected through debt collection to reflect an income-driven structure in which borrowers only pay what they can afford. While these reforms would not solve the broken default system, they would mitigate its impact on American families, and ensure that borrowers are never forced to pay more in default than they would under an IDR plan.
Book Synopsis Income-Driven Repayment and the Public Financing of Higher Education by : John R. Brooks
Download or read book Income-Driven Repayment and the Public Financing of Higher Education written by John R. Brooks and published by . This book was released on 2016 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: This article provides the first comprehensive analysis in the legal literature of the federal government's new income-driven student loan repayment programs, known as Income-Based Repayment and Pay As You Earn. In a set of gradual and little-noticed statutory and regulatory moves, the federal government, through these programs, has dramatically reshaped higher education finance in ways that schools, students, and even the government itself are only beginning to understand.Under IBR and PAYE, a student borrower pays no more than 10% of her discretionary income in loan service payments, and after a maximum of 20 years, the remaining debt is forgiven -- for any borrower, regardless of degree, career, or debt load. This article argues that such an income-driven system is analogous to the federal government paying the up-front costs of higher education, but raising that money from a 10% “surtax” in the incomes of graduates. This is a huge change from the current mixture of debt-financed tuition, need-based grants, and moderate state subsidies.This framing raises important questions. Is this income-driven repayment structure appropriate? How tax-like and progressive are IBR and PAYE in fact, and can they be made more (or less) so? What are the risks and downsides of such a structure? This article claims that using a tax-like instrument such as income-driven repayment is well suited for higher education, given its economics, financial characteristics, and social benefits. In particular, the key difference between income-driven repayment and up-front need-based grants, such as Pell Grants, is that income-driven repayment makes a judgment of need based on ex post graduate income, rather than ex ante parental income. Based on this analysis, this article concludes with some novel suggestions for reform to PAYE.
Book Synopsis Federal Student Loans, Education Needs to Improve Its Income-Driven Repayment Plan Budget Estimates by : U.s. Government Accountability Office
Download or read book Federal Student Loans, Education Needs to Improve Its Income-Driven Repayment Plan Budget Estimates written by U.s. Government Accountability Office and published by Createspace Independent Publishing Platform. This book was released on 2017-07-26 with total page 100 pages. Available in PDF, EPUB and Kindle. Book excerpt: Federal student loans, Education needs to improve its income-driven repayment plan budget estimates: report to the Chairman, Committee on the Budget, U.S. Senate. As of June 2016, 24 percent of Direct Loan borrowers repaying their loans (or 5.3 million borrowers) were doing so in IDR plans, compared to 10 percent in June 2013. Education expects these plans to have costs to the government. GAO was asked to review Education's IDR plan budget estimates and estimation methodology. This report examines: (1) current IDR plan budget estimates and how those estimates have changed over time, and (2) the extent to which Education's approach to estimating costs and quality control practices help ensure reliable estimates. GAO analyzed published and unpublished budget data covering Direct Loans made from fiscal years 1995 through 2015 and estimated to be made in 2016 and 2017; analyzed and tested Education's computer code used to estimate IDR plan costs; reviewed documentation related to Education's estimation approach; and interviewed officials at Education and other federal agencies.
Book Synopsis Taking It to the Limit by : Sandra Black Youngblood
Download or read book Taking It to the Limit written by Sandra Black Youngblood and published by . This book was released on 2020 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Growing reliance on student loans and repayment difficulties have raised concerns of a student debt crisis in the United States, but little is known about the effects of student borrowing on human capital and long-run financial well-being. We use variation induced by recent expansions in federal loan limits combined with administrative datasets to identify the effects of increased access to student loans on credit-constrained students' educational attainment, earnings, debt, and loan repayment. Increased student loan availability raises student debt and improves degree completion, later-life earnings, and student loan repayment while having no effect on homeownership or other types of debt.
Book Synopsis Should All Student Loan Payments Be Income-Driven? by : Lauren Asher
Download or read book Should All Student Loan Payments Be Income-Driven? written by Lauren Asher and published by . This book was released on 2014 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: This white paper analyzes the potential effects of requiring income-driven repayment for all federal loans as well as relying on paycheck withholding for loan payments, with particular attention to the implications for low-income students and families. The Institute for College Access & Success (TICAS) also examines the relevance and evolution of mandatory IDR ["income-driven repayment"] systems in Australia and the United Kingdom, and the paper includes specific recommendations to streamline and improve student loan repayment options in the United States. Two appendices are included: (1) Citation List of Figure 2: "Key Comparisons of IDR Systems and Context: U.S., U.K., and Australia"; and (2) Borrower Example Details.
Book Synopsis Student Loans and Repayment by : Lance Lochner
Download or read book Student Loans and Repayment written by Lance Lochner and published by . This book was released on 2014-12-24 with total page 95 pages. Available in PDF, EPUB and Kindle. Book excerpt: Rising costs of and returns to college have led to sizeable increases in the demand for student loans in many countries. In the U.S., student loan default rates have also risen for recent cohorts as labor market uncertainty and debt levels have increased. The authors discuss these trends as well as recent evidence on the extent to which students are able to obtain enough credit for college and the extent to which they are able to repay their student debts after. They then discuss optimal student credit arrangements that balance three important objectives. They also survey other research related to the optimal design of student loan contracts in imperfect markets. Finally, they provide practical policy guidance for re-designing student loan programs to more efficiently provide insurance while addressing information and commitment frictions in the market. Tables and figures. This is a print on demand report.
Author :National Association of Student Financial Aid Administrators (NASFAA) Publisher : ISBN 13 : Total Pages :13 pages Book Rating :4.:/5 (16 download)
Book Synopsis Income-Contingent Student Loan Repayment Systems Outside the U.S. by : National Association of Student Financial Aid Administrators (NASFAA)
Download or read book Income-Contingent Student Loan Repayment Systems Outside the U.S. written by National Association of Student Financial Aid Administrators (NASFAA) and published by . This book was released on 2014 with total page 13 pages. Available in PDF, EPUB and Kindle. Book excerpt: There is remarkable diversity in student loan systems throughout the world. In considering the ideal approach to system of loan repayment based on income here in the United States, it is valuable to examine the nature, successes, and failures of some other countries' methods of offering borrowers income-contingent student loan repayment. Two countries that seem to be particularly relevant to the efforts of this consortium are Australia and the Netherlands. While far from the only countries that use an income-contingent student loan repayment scheme, these two were selected for analysis because of the differences they illustrate: a "pure" system in the case of Australia and a "hybrid" system in the case of the Netherlands. This consortium's proposal for an auto-IBR system in "Automatic for the Borrower: How Repayment Based on Income Can Reduce Loan Defaults and Manage Risk" represents an ideological shift in the student loan system in the United States; a potentially complicated restructuring of the current system that would involve several government agencies. In striving for something simple, efficient and fair there is always a chance for unintended consequences; thus, there is value in looking to other countries to draw instruction from their experiences. In the two countries surveyed, there seems to be a delicate balance between uptake rate and overall cohort repayment rate. The Netherlands system suffers from a lack of participation, partially as a result of its opt-in nature, but the Australian system suffers from a substantial amount of debt that is unlikely to be repaid. Policymakers should consider this balance when they set objectives for an auto-IBR system and design the system to maximize participation while protecting against providing excessive loan forgiveness or opportunity for non-payment. [This paper accompanies "Automatic for the Borrower: How Repayment Based on Income Can Reduce Loan Defaults and Manage Risk" ED558514.].
Book Synopsis Essays on Economic Analysis of Student Loans by : Kiatanantha Lounkaew
Download or read book Essays on Economic Analysis of Student Loans written by Kiatanantha Lounkaew and published by . This book was released on 2012 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis contributes to the student loan literature by addressing the issues of interest rate subsidies and repayment burdens; it also demonstrates both conceptually and empirically how the interactions between these two components form the basis for trade-off for government between the interest rate charged on student loans and the expected aggregate loans recovery. Chapter 2 measures the extent of interest rate subsidies implicit in the design of Thailand's 2006 scheme, Thai Income Contingent Allowances and Loans (TICAL), and two alternative hypothetical income contingent loan (ICL) arrangements. The subsidies for TICAL-type arrangements and for a typical debt size of 200,000 Baht are between 25 and 40 per cent on average, but about zero for the alternative ICLs. With a disaggregated earnings approach and typical current debts, subsidies for TICAL-type schemes are estimated to be about 30 to 55; the two alternative ICLs are associated with interest rate subsidies of 3 and 18 per cent. With very large debts, however, the subsidies of all schemes are as high as 25-60 per cent. The results from two alternative ICLs suggest that, with appropriate first repayment arrangement and effective collection agency, ICL can be a viable option for a moderate level of debt. Chapter 3 attempts to estimate empirically optimal levels of interest rate subsidies. Based on Diamond and Mirrlees (1971) Production Efficiency Theorem and Bovenberg and Jacobs (2005)'s optimal income tax and subsidies model, the chapter proposes several empirical strategies to make the model operational. It is found that if policy-makers chose to use this mechanism to correct the distortions associated with the imposition of income taxes on graduates, the current implicit interest rate subsidies on Thai student loans would be considerably lower than they currently are, but not zero. Chapter 4 contributes to the student loans reform debate by demonstrates empirically the inverted u-shaped relationship of this trade-off using current Thai Student Loans Fund (SLF) repayment arrangements as a case study. The empirical exercise reveals that with a typical loan size of 200,000 Baht and repayment burden of 8 per cent, the maximum expected aggregate loans recovery is about 40 per cent; this means that interest rate subsidies are in the order of 60 per cent. Given the fact that the expected aggregate loan recovery of the SLF is around 35 per cent, any reform in the context of current SLF design will not offer much improvement in terms of collection. There is a clear policy implication from these exercises. A mortgage-type loan such as the SLF does not function properly as a student loan. Generous subsidies offered by the scheme make it a grant system, requiring financial support from the government. An ICL arrangement similar to the two hypothetical ICL schemes proposed in Chapter 2 can offer a potential improvement in terms of reducing interest rate subsidies. This new ICL scheme can be implemented through the existing social security system whose coverage is as extensive as the tax system.
Book Synopsis Handbook of Behavioral Economics - Foundations and Applications 1 by :
Download or read book Handbook of Behavioral Economics - Foundations and Applications 1 written by and published by Elsevier. This book was released on 2018-09-27 with total page 749 pages. Available in PDF, EPUB and Kindle. Book excerpt: Handbook of Behavioral Economics: Foundations and Applications presents the concepts and tools of behavioral economics. Its authors are all economists who share a belief that the objective of behavioral economics is to enrich, rather than to destroy or replace, standard economics. They provide authoritative perspectives on the value to economic inquiry of insights gained from psychology. Specific chapters in this first volume cover reference-dependent preferences, asset markets, household finance, corporate finance, public economics, industrial organization, and structural behavioural economics. This Handbook provides authoritative summaries by experts in respective subfields regarding where behavioral economics has been; what it has so far accomplished; and its promise for the future. This taking-stock is just what Behavioral Economics needs at this stage of its so-far successful career. - Helps academic and non-academic economists understand recent, rapid changes in theoretical and empirical advances within behavioral economics - Designed for economists already convinced of the benefits of behavioral economics and mainstream economists who feel threatened by new developments in behavioral economics - Written for those who wish to become quickly acquainted with behavioral economics
Book Synopsis Higher Education Accountability by : Robert Kelchen
Download or read book Higher Education Accountability written by Robert Kelchen and published by JHU Press. This book was released on 2018-02-27 with total page 271 pages. Available in PDF, EPUB and Kindle. Book excerpt: Beginning with the earliest efforts to regulate schools, the author reveals the rationale behind accountability and outlines the historical development of how US federal and state policies, accreditation practices, private-sector interests, and internal requirements have become so important to institutional success and survival
Book Synopsis Financial Literacy and the Limits of Financial Decision-Making by : Tina Harrison
Download or read book Financial Literacy and the Limits of Financial Decision-Making written by Tina Harrison and published by Springer. This book was released on 2016-09-20 with total page 362 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book presents selected papers on the factors that serve to influence an individual’s capacity in financial decision-making. Initial chapters provide an overview of the cognitive factors affecting financial decisions and suggest a link between limited cognitive capacity and the need for financial education. The book then expands on these cognitive limitations to explore the tendency for overconfidence in decision-making and the interplay between rational and irrational factors. Later contributions show how credit card companies benefit from limitations in consumer financial literacy, how gender and cognition intersect to play an important role in financial decision-making, and how to improve financial capacity through financial literacy and education campaigns, including those addressing developed marketplaces. This comprehensive collection of papers will be of value to all readers who seek to better understand the multi-factorial and complex nature of personal financial management in today’s economic climate.
