Who Mismanages Student Loans, and Why?

Kimberly Cornaggia and Han Xia

The Review of Financial Studies, 2024, vol. 37, issue 1, 161-200

Abstract: Many financially distressed students who qualify for federal assistance plans with interest moratorium and principal forgiveness instead accrue interest over long periods of nonpayment. This loan mismanagement is associated with higher delinquency. Mismanagement varies significantly across student gender and race: it is more prominent among male and non-white students. Mismanagement also varies across loan servicers, depending on proxies for student-adverse servicer policies. We consider explanations based on student selection and servicer treatment for loan mismanagement. Student financial literacy plays an important role but variation in treatment on the part of loan servicers appears more important.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online

Keywords: D14; H52; H81; I22; I28 (search for similar items in EconPapers)
Date: 2024
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