The Self-Perpetuating Student Loan Debt Crisis

David Jinkins ()
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David Jinkins: Copenhagen Business School

Economics Bulletin, 2020, vol. 40, issue 3, 2380-2387

Abstract: Student loan debt has grown quickly over the last decade to become the largest category of non-housing debt among American households. Several prominent politicians have advocated cancelling all student loan debt. In this paper I argue that the possibility of debt cancellation has made borrowers hesitant to pay back their debt, further exacerbating the crisis and leading to more political support for debt cancellation. In a simple calibration targeting the growth of student loan debt from 2003-2018, I find that the probability of student loan debt cancellation is 28.5%.

Keywords: Student loan debt; Debt forgiveness; Debt cancellation; Amer- ican politics (search for similar items in EconPapers)
JEL-codes: H3 H8 (search for similar items in EconPapers)
Date: 2020-08-31
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