Financial Benefits of Rapid Student Loan Repayment: An Analytic Framework Employing Two Decades of Data

Manuel S. González Canché

The ANNALS of the American Academy of Political and Social Science, 2017, vol. 671, issue 1, 154-182

Abstract: This study analyzes the benefits of rapid student loan repayment, defined here as borrowers who repaid their cumulative undergraduate loan debt in half the time of the expected repayment cycle (10 years). Drawing from data on borrowers in two nationally representative samples, I first explain the analytic framework employed to identify rapid loan repayers, then examine whether rapid loan repayment is associated with financial benefits in terms of salary, homeownership, and non–poverty level, identifying how rapid loan repayers differ from their non–rapid loan repayer and nonborrower counterparts. Results show salary benefits associated with rapid loan repayment and indicate that among rapid loan repayers, cumulative loan debt generally did not surpass $15,000. These findings suggest that policy-makers may consider the adoption of shorter repayment plans with clear eligibility cutoff amounts as an alternative to the more common 10-year fixed plan.

Keywords: student loan debt; rapid loan repayment; quasi-experimental design; financial aid; propensity score weighting; Heckman control function (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:sae:anname:v:671:y:2017:i:1:p:154-182

DOI: 10.1177/0002716217701700

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