The Distributional Effects of Student Loan Forgiveness

Even worse than you thought:

We study the distributional consequences of student debt forgiveness in present value terms, accounting for differences in repayment behavior across the earnings distribution. Full or partial forgiveness is regressive because high earners took larger loans, but also because, for low earners, balances greatly overstate present values. Consequently, forgiveness would benefit the top decile as much as the bottom three deciles combined. Blacks and Hispanics would also benefit substantially less than balances suggest. Enrolling households who would benefit from income-driven repayment is the least expensive and most progressive policy we consider.

That is from a working paper by Sylvaine Catherine and Constantine Yanellis.  It is sad that such material even needs to be posted.  I hope you are not taken in by Dube-ous ideas to the contrary!



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