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.


More Research From These Scholars

BFI Working Paper Nov 16, 2020

Did the Paycheck Protection Program Hit the Target?

Joao Granja, Christos Makridis, Constantine Yannelis, Eric Zwick
Topics:  COVID-19
BFI Working Paper Sep 15, 2020

Income, Liquidity, and the Consumption Response to the 2020 Economic Stimulus Payments

Scott R. Baker, R.A. Farrokhnia, Steffen Meyer, Michaela Pagel, Constantine Yannelis
Topics:  COVID-19
BFI Working Paper Mar 31, 2020

How Does Household Spending Respond to an Epidemic? Consumption During the 2020 COVID-19 Pandemic

Scott R. Baker, R.A. Farrokhnia, Steffen Meyer, Michaela Pagel, Constantine Yannelis
Topics:  COVID-19