Federal Student Loan Program: Quantitative implications for college enrollment, repayment and default rates.

摘要

My research analyzes the interaction of education opportunities, college financing and repayment incentives under the Federal Student Loan Program. Borrowing and repaying student loans has become an important issue to students, creditors and policy makers alike. In 2001 {dollar}54 billion loans were used to finance college education. While the default rate declined substantially since 1990, it remains a significant concern to policy makers.; The first chapter focuses on the repayment behavior under the current FSLP. I develop a dynamic stochastic model with uninsurable shocks to earnings and to student loan rates and study the effects of a current reform proposal. The model quantitatively and qualitatively explains the repayment pattern in the data. Default does not occur among the most financially constrained group of college graduates.The option is rather typical for college graduates with intermediate debt relative to their earnings. A proposal that aims to eliminate the possibility to lock in the rate increases the default rate by 8%. The increase is largely accounted for by lower income borrowers.; My second chapter investigates the quantitative effects of the consolidation program and the relaxation of eligibility requirements. In addition to repayment behavior, I examine college enrollment and debt chosen by high-school graduates in a life-cycle economy that generalizes the Ben-Porath model of earnings and human capital. The model implies that financial constraints do not impede college participation. It is rather the ability and initial human capital stock that dominate college enrollment decision. A change in policy that allows students for more flexibility in repayment increases college enrollment and declines default significantly while relaxed eligibility requirements have little effect on both. The former policy induces substantial welfare gains for bottom income quantiles while the latter policy implies no welfare gains.; In the last chapter I consider the implications of a change in the bankruptcy rule that made student loans nondischargeable under Chapter 13 in the Bankruptcy Code. I build up on previous chapters to mimic the student loan market characteris tics for liquidation and reorganization periods. I investigate the effects of the change in the bankruptcy rules across different groups of borrowers.