Who Mismanages Student Loans and Why?

From Kimberly Rodgers Cornaggia and Han Xia:

With a license to use individually identifiable information on student loan borrowers, we find that a majority of distressed student borrowers manage their debt sub-optimally and that suboptimal debt management is associated with higher loan delinquency. Cross-sectional analysis indicates that loan (mis)management varies significantly across student gender, ethnicity, and age. We test several potential selection-based explanations for such demographic variation in student loan management, including variation in students’ overconfidence, consumption preferences and discount rates, and aversion to administrative paperwork. Motivated by federal and state allegations against student loan servicers, we also test for the presence of treatment effects. Overall, the empirical evidence supports the conclusion that loan servicers’ differential treatment across borrowers play an important role in student loan outcomes.

Here is a key background fact:

Broadly, subsidized student borrower assistance programs include provisions for loan forbearance, loan deferment, and
income-driven repayment (IDR) options for financially distressed borrowers.

Borrowers should switch to those provisions more than they do, with older students, non-traditional students, males, and non-whites performing less well than others.  Here is the link to the paper, via the excellent Kevin Lewis.