Payback Time? Measuring Progress on Student Debt Repayment

Brown, Meta; Haughwout, Andrew F.; Lee, Donghoon; Scally, Joelle; Van der Klaauw, Wilbert

Discussion Paper

Payback Time? Measuring Progress on Student Debt Repayment

Abstract: Student debt continues to make headlines because of its high balances and high rates of delinquency and default?troubling issues that we discussed in our previous posts this week. A less prominent, but still important, issue is the pace at which former students are?or are not?paying off their debts. This issue is important to borrowers because the longer they take to repay their debts, the more interest they accrue, the longer they have to worry about making payments, and the longer they have to deal with the consequences of unpaid debts. It?s also important to the macroeconomy because longer repayment periods mean that a large number of young adults may have their spending and housing purchase decisions constrained by student debt (and widespread delinquency) for many years, even if they eventually qualify for some debt forgiveness. For these reasons, in this third and final post of our student loan series, we use our Consumer Credit Panel (based on Equifax data) to examine how fast (or slow) student borrowers are able to pay off their loans.

Keywords: default rate; household debt; delinquency rate; student loans;

JEL Classification: D1;