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

• Published in: The Annals of the American Academy of Political and Social Science Vol. 671; no. 1; pp. 224 - 248
• Main Authors: DI, WENHUA, EDMISTON, KELLY D.
• Format: Journal Article
• Language: English
• Published: Los Angeles, CA SAGE Publishing 01-05-2017; SAGE Publications; SAGE PUBLICATIONS, INC
• Subjects: College students; Criminality; Debt; Decision making; Federal government; Juvenile delinquency; Low income groups; Participation; Policy making; Student loans; Taxation; What Are the Implications for Federal Policy?; fiscal impact; student loan; relief programs; repayment
• ISSN: 0002-7162; 1552-3349
• DOI: 10.1177/0002716217704410

As college costs increase and more students fund their education through borrowing, debt load and delinquency rates have become significant problems. This article discusses the impacts of the federal student loan repayment relief programs that are available. The implications of relief plans on borrowers' costs and the federal budget vary by plan and for different loan amounts and income levels, making it challenging for policy-makers to design programs that adequately balance risks between borrowers and taxpayers. Existing programs are also complicated, making it difficult for borrowers to make informed decisions on repayment programs. We examine how the various programs work in practice and consider their likely outcomes over a set of income-debt-program scenarios, bringing clarity to the repayment environment. We find that lowerincome borrowers and borrowers who will have significant remaining balances forgiven at the end of the required repayment period are generally more likely to benefit from loan relief programs, but participation of these borrowers can be very costly.