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Report
Beyond the Minimum: Excess Student Loan Payments in Summer and Fall 2023
We provided a view into borrower expectations for resumed payments on the eve of the student loan payment pause coming to an end in our previous report, which was the first in our series on student loan payments resumption. Our report showed that most borrowers successfully resumed payments and expected to continue being able to make payments through the end of 2023, but segments of the student borrower population have not resolved their repayment struggles despite available relief. The trends we identified in the data reflected any debt cancellation granted to borrowers in 2023, loan payoffs ...
Report
SAVE Your Guesses: Borrower Expectations for Enrollment in the New SAVE Income-Driven Repayment Plan
As the end of the pandemic-era payment pause on federal student loans was announced, the U.S. Department of Education introduced measures to help ease borrowers back into repayment. One such measure included a change to the menu of repayment plans that are offered to borrowers to reduce their scheduled monthly payments. In this third report in our series on the student loan payments resumption, we consider borrower awareness of, intended enrollment in, and estimated payment reductions from the most recent and most generous income-driven repayment (IDR) plan yet: the Saving on a Valuable ...
Discussion Paper
Consumer use of fraud alerts and credit freezes: an empirical analysis
Fraud alerts ? initial fraud alerts, extended fraud alerts, and credit freezes ? help protect consumers from the consequences of identity theft. At the same time, they may impose costs on lenders, credit bureaus, and, in some instances, consumers. We analyze a unique data set of anonymized credit bureau files to understand how consumers use these alerts. We document the frequency and persistence of fraud alerts and credit freezes. Using the experience of the data breach at the South Carolina Department of Revenue, we show that consumers who file initial fraud alerts or credit freezes likely ...
Discussion Paper
Do we still need the Equal Credit Opportunity Act?
The Equal Credit Opportunity Act (ECOA) prohibits discrimination in any aspect of a credit transaction based on sex, marital status, race, ethnicity, age, or other specified factors. Regulation B implementing the ECOA, a applied by the courts, requires that financial institutions challenged on the basis that a policy or practice has a disparate impact on a protected class must demonstrate that such a policy or practices is related to creditworthiness and is justified by a legitimate and necessary business objective. Certain factors that lenders may use in their decisions regarding ...
Working Paper
Financial Consequences of Identity Theft: Evidence from Consumer Credit Bureau Records
This paper examines how a negative shock to the security of personal finances due to severe identity theft changes consumer credit behavior. Using a unique data set of consumer credit records and alerts indicating identity theft and the exogenous timing of victimization, we show that the immediate effects of fraud on credit files are typically negative, small, and transitory. After those immediate effects fade, identity theft victims experience persistent, positive changes in credit characteristics, including improved Risk Scores. Consumers also exhibit caution with credit by having fewer ...
Working Paper
Identity theft as a teachable moment
This paper examines how instances of identity theft that are sufficiently severe to induce consumers to place an extended fraud alert in their credit reports affect their risk scores, delinquencies, and other credit bureau variables on impact and thereafter. We show that for many consumers these effects are relatively small and transitory. However, for a significant number of consumers, especially those with lower risk scores prior to the event, there are more persistent and generally positive effects on credit bureau variables, including risk scores. We argue that these positive changes for ...
Working Paper
Navigating Higher Education Insurance: An Experimental Study on Demand and Adverse Selection
We conduct a survey-based experiment with 2,776 students at a non-profit university to analyze income insurance demand in education financing. We offered students a hypothetical choice: either a federal loan with income-driven repayment or an income-share agreement (ISA), with randomized framingof downside protections. Emphasizing income insurance increased ISA uptake by 43%. We observe that students are responsive to changes in contract terms and possible student loan cancellation, which is evidence of preference adjustment or adverse selection. Our results indicate that framing specific ...
Discussion Paper
Fair lending analysis of credit cards
This paper discusses some of the key fair lending risks that can arise in various stages of the marketing, acquisition, and management of credit card accounts, and the analysis that can be employed to manage such risks. The Equal Credit Opportunity Act (ECOA) and its implementing Regulation B prohibit discrimination in all aspects of credit transactions and include specific provisions relating to processes that employ credit scoring models. This paper discusses some of the areas of credit card operations that may be assessed in an effort to manage the risk of noncompliance with fair lending ...
Report
Expectations of Student Loan Repayment, Forbearance, and Cancellation: Insights from Recent Survey Data
This report adds to our understanding of student borrower experiences with and future expectations of student loan repayment, forbearance, and loan cancellation using responses to the January 2022 and April 2022 waves of the COVID-19 Survey of Consumers conducted by the Federal Reserve Bank of Philadelphia’s Consumer Finance Institute (CFI).
Discussion Paper
Modern Income-Share Agreements in Postsecondary Education: Features, Theory, Applications
An income-share agreement (ISA) in postsecondary education is a contract in which students pledge to pay a certain percentage of their future incomes over a set period of time in exchange for funding educational program expenses in the present. Typically, participants begin to make payments once their incomes rise above a minimum threshold set by the terms of the ISA and will never pay more than a set cap (usually, a multiple of the original amount). Funding for ISAs can range from university sources to philanthropic funding and private investor capital. In this study, we describe the many ...