Search Results
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 ...
Working Paper
Predicting College Closures and Financial Distress
In this paper, we assemble the most comprehensive dataset to date on the characteristics of colleges and universities, including dates of operation, institutional setting, student body, staff, and finance data from 2002 to 2023. We provide an extensive description of what is known and unknown about closed colleges compared with institutions that did not close. Using this data, we first develop a series of predictive models of financial distress, utilizing factors like operational revenue/expense patterns, sources of revenue, metrics of liquidity and leverage, enrollment/staff patterns, and ...
Report
Summary of the Symposium on Institutions of Higher Education: Financial Viability and COVID-19
The Federal Reserve Bank of Philadelphia’s Consumer Finance Institute (CFI) held a virtual symposium on May 12, 2021, on the topic of financial health and stability of higher education institutions. The symposium included three panel discussions as well as remarks from Philadelphia Fed President Patrick T. Harker on fiscal pressures experienced by colleges and universities, especially in light of the pandemic. Participants also discussed what is on the horizon for higher education, a sector of great importance to the U.S. economy.
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 ...
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
Consumer financial protection regulations: how do they measure up?
The Payment Cards Center's September 2012 policy conference advanced the discussion of targeted design and outcome measurement as central features of public policy in the area of consumer financial protections. Speakers considered regulations addressing the disclosure of credit terms; standards for assessing the unfairness, deceptiveness, and abusiveness of lending acts or practices; the management of revolving credit accounts; and the challenges of analyzing consumer complaints in the context of consumer financial protections. The concluding panel discussed unanswered questions and research ...
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 ...
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 ...
Discussion Paper
The Lingering Fiscal Effects of the COVID-19 Pandemic on Higher Education
The unprecedented challenges from COVID-19 present many institutions of higher education with liquidity, and even solvency, concerns. In this report, we provide guidance to institutions and policymakers about the short- and medium-term revenue losses that are likely to materialize as a result of the ongoing pandemic and associated disruptions to revenue and expenses. Using historical data on states’ responses to previous economic downturns and contemporaneous measures of the severity of the current economic predicament, we project state and local appropriation reductions that public ...
Working Paper
Financial Fraud Through the Lens of Extended Fraud Alerts
We use extended fraud alerts in anonymized credit reports to examine how identity theft, and subsequent clean-up, affects consumers’ credit outcomes. The immediate effects of fraud for these consumers are negative, relatively small, and transitory. After placing an alert, these consumers experience persistent declines in delinquencies and a 12-point increase in credit scores, and 11 percent of filers become prime consumers. Many of these consumers take advantage of their improved creditworthiness and obtain additional credit. Although alert filers have larger balances, their performance on ...