Do student loan borrowers opportunistically default? Evidence from bankruptcy reform

Rajeev Darolia and Dubravka Ritter

No 15-17, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: Bankruptcy reform in 2005 eliminated debtors? ability to discharge private student loan debt in bankruptcy. This law aimed to reduce costly defaults by diminishing the perceived incentive of some private student loan borrowers to declare bankruptcy even if they had sufficient income to service their debt. Using a unique, nationally representative sample of anonymized credit bureau files, we examine the bankruptcy filing and delinquency rates of private student loan borrowers in response to the 2005 bankruptcy reform. We do not find evidence that the nondischargeability provision reduced the likelihood of filing bankruptcy among private student loan borrowers as compared with other debtors whose incentives were not directly affected by the policy.

Keywords: Bankruptcy; Bankruptcy Reform; BAPCPA; Default; Student Loans (search for similar items in EconPapers)
JEL-codes: D14 G21 I22 K35 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2015-04-09
New Economics Papers: this item is included in nep-ban and nep-law
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Citations: View citations in EconPapers (2)

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