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Journal Article
GSE guarantees, financial stability, and home equity accumulation
Passmore, Wayne; von Hafften, Alexander H. (2018-24-03)
Before 2008, the government?s ?implicit guarantee? of the securities issued by the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac led to practices by these institutions that threatened financial stability. In 2008, the Federal Housing Finance Agency placed these GSEs into conservatorship. Conservatorship was intended to be temporary but has now reached its tenth year, and policymakers continue to weigh options for reform. In this article, the authors assess both implicit and explicit government guarantees for the GSEs. They argue that adopting a legislatively defined ...
Economic Policy Review , Issue 24-3 , Pages 11-27

Working Paper
Navigating Higher Education Insurance: An Experimental Study on Demand and Adverse Selection
Balakrishnan, Sidhya; Bettinger, Eric; Kofoed, Michael S.; Ritter, Dubravka; Webber, Douglas A.; Aksu, Ege; Hartley, Jonathan S. (2024-04-19)
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 ...
Finance and Economics Discussion Series , Paper 2024-024

Report
Personal Bankruptcy Protection and Household Debt
Severino, Felipe; Brown, Meta; Chakrabarti, Rajashri (2024-04-01)
Increasing personal bankruptcy protection raises consumers’ desire to borrow and lenders’ cost of extending credit; the impact on equilibrium borrowing is ambiguous. Using bankruptcy protection changes between 1999 and 2005 across U.S. states, we find that borrowers respond to greater protection by increasing their unsecured debt. Border county estimates suggest that local economic conditions do not drive these results. Borrowers pay more for protection through higher interest rates, yet delinquency is unaffected. Remarkably, our results indicate that rising borrower demand outstripped ...
Staff Reports , Paper 1099

Report
Allocation and Employment Effect of the Paycheck Protection Program
Joaquim, Gustavo (2021-12-21)
The Paycheck Protection Program (PPP) was a large and unprecedented small-business support program enacted as a response to the COVID-19 crisis in the United States. The PPP administered almost $800 billion in loans and grants to small businesses through the banking system. However, there is still limited consensus on its overall effect on employment. This paper explores why it is challenging to estimate the effect of the PPP. To do so, we first focus on the timing of the allocation of PPP funds across regions and firms. Counties less affected by COVID-19 and with a larger presence of ...
Current Policy Perspectives

Working Paper
Bank Incentives and the Effect of the Paycheck Protection Program
Joaquim, Gustavo; Netto, Felipe (2021-10-01)
We assess the role of banks in the Paycheck Protection Program (PPP), a large and unprecedented small-business support program instituted as a response to the COVID-19 crisis in the United States. In 2020, the PPP administered more than $525 billion in loans and grants to small businesses through the banking system. First, we provide empirical evidence of heterogeneity in the allocation of PPP loans. Firms that were larger and less affected by the COVID-19 crisis received loans earlier, even in a within-bank analysis. Second, we develop a model of PPP allocation through banks that is ...
Working Papers , Paper 21-15

Working Paper
Estimating the Tax and Credit-Event Risk Components of Credit Spreads
Goldstein, Robert S.; Benzoni, Luca (2015-11-18)
This paper argues that tax liabilities explain a large fraction of observed short-maturity investment-grade (IG) spreads, but credit-event premia do not. First, we extend Duffie and Lando (2001) by permitting management to issue both debt and equity. Rather than defaulting, managers of IG firms who receive bad private signals conceal this information and service existing debt via new debt issuance. Consistent with empirical observation, this strategy implies that IG firms have virtually zero credit-event risk (at least until they become ?fallen angels"). Second, we provide empirical evidence ...
Working Paper Series , Paper WP-2017-17

Report
Tuition, Debt, and Human Capital
Chakrabarti, Rajashri; Liberman, Andres; Yannelis, Constantine; Fos, Vyacheslav (2020-02-01)
This paper investigates the eﬀects of college tuition on student debt and human capital accumulation. We exploit data from a random sample of undergraduate students in the United States and implement a research design that instruments for tuition with relatively large changes to the tuition of students who enrolled at the same school in diﬀerent cohorts. We ﬁnd that $10,000 in higher tuition causally reduces the probability of graduating with a graduate degree by 6.2 percentage points and increases student debt by $2,961. Higher tuition also reduces the probability of obtaining an ...
Staff Reports , Paper 912

Report
How the Student Loan Payment Pause Affected Borrowers’ Credit Access and Credit Use
Cooper, Daniel H.; Haddix, Maddie (2025-01-13)
This brief examines how the pandemic-related, 43-month moratorium on federal student loan payments and interest accruals affected borrowers’ credit card limits and balances. The pause freed up an average of $280 a month for each of the 17 million student loan holders in active repayment, and it included a provision that erased previous defaults on student loans.
Current Policy Perspectives , Paper 25-1

Working Paper
The Tail That Wagged the Dog: What Explains the Persistent Employment Effect of the 10-Day PPP Funding Delay?
Gorbachev, Olga; Luengo-Prado, Maria Jose; Wang, J. Christina (2023-07-01)
This study explores the mechanisms explaining the large, persistent effect of the 10-day funding delay in the 2020 Paycheck Protection Program (PPP) on employment recovery during the COVID-19 pandemic, as estimated by Doniger and Kay (2021). We find that the top 1 percent of urban counties by population fully account for the significant effect of the delay on county-level employment. The strong correlation between worse loan delay and slower employment growth in these counties is due to a factor commonly omitted from analyses: The nature of business and the high rate of human interactions in ...
Working Papers , Paper 23-6

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