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Jel Classification:H81 

Report
Student Debt and Default: The Role of For-Profit Colleges

For-profit providers have become an important fixture of U.S. higher education markets. Students who attend for-profit institutions take on more educational debt and are more likely to default on their student loans than those attending similarly selective public schools. Because for-profits tend to serve students from more disadvantaged backgrounds, it is important to isolate the causal effect of for-profit enrollment on student debt and repayment outcomes as well as the educational and labor market mechanisms that drive any such effects. We approach this problem using a novel instrument ...
Staff Reports , Paper 811

Journal Article
Pricing government credit: a new method for determining government credit risk exposure

A growing debate centers on how best to recognize (and price) government interventions in the capital markets. This study applies a method for estimating and valuing the government?s exposure to credit risk through its loan and guarantee programs. The authors use the mortgage portfolios of Fannie Mae and Freddie Mac as examples of how policymakers could employ this method in pricing the government?s program credit risk. Building on the cost of capital approach, the method captures each program?s possible tail loss over and above its expected value. The authors then use a capital allocation ...
Economic Policy Review , Issue 24-3 , Pages 41-62

Working Paper
The Mortgage Rate Conundrum

We document the emergence of a disconnect between mortgage and Treasury interest rates in the summer of 2003. Following the end of the Federal Reserve expansionary cycle in June 2003, mortgage rates failed to rise according to their historical relationship with Treasury yields, leading to significantly and persistently easier mortgage credit conditions. We uncover this phenomenon by analyzing a large dataset with millions of loan-level observations, which allows us to control for the impact of varying loan, borrower and geographic characteristics. These detailed data also reveal that ...
Working Paper Series , Paper WP-2017-23

Report
The Main Street Lending Program

The Main Street Lending Program was created to support credit to small and medium-sized businesses and nonprofit organizations that were harmed by the pandemic, particularly those that were unsupported by other pandemic-response programs. It was the most direct involvement in the business loan market by the Federal Reserve since the 1930s and 1940s. Main Street operated by buying 95 percent participations in standardized loans from lenders (mostly banks) and sharing the credit risk with them. It would end up supporting loans to more than 2,400 borrowers and co-borrowers across the United ...
Current Policy Perspectives

Report
Allocation and Employment Effect of the Paycheck Protection Program

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

Report
Tuition, Debt, and Human Capital

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

Discussion Paper
Student Loan Repayment during the Pandemic Forbearance

The onset of the COVID-19 pandemic brought substantial financial uncertainty for many Americans. In response, executive and legislative actions in March and April 2020 provided unprecedented debt relief by temporarily lowering interest rates on Direct federal student loans to 0 percent and automatically placing these loans into administrative forbearance. As a result, nearly 37 million borrowers have not been required to make payments on their student loans since March 2020, resulting in an estimated $195 billion worth of waived payments through April 2022. However, 10 million borrowers with ...
Liberty Street Economics , Paper 20220322

Working Paper
The Effects of the 1930s HOLC \"Redlining\" Maps

In the wake of the Great Depression, the Federal government created new institutions such as the Home Owners' Loan Corporation (HOLC) to stabilize housing markets. As part of that effort, the HOLC created residential security maps for over 200 cities to grade the riskiness of lending to neighborhoods. We trace out the effects of these maps over the course of the 20th and into the early 21st century by linking geocoded HOLC maps to both Census and modern credit bureau data. Our analysis looks at the difference in outcomes between residents living on a lower graded side versus a higher graded ...
Working Paper Series , Paper WP-2017-12

Working Paper
Optimal Allocation of Relief Funds: The Case of the Paycheck Protection Program

The Paycheck Protection Program (PPP) was a large and unprecedented small-business support program that allocated $800 billion in loans and grants to small businesses following the onset of the COVID-19 crisis. This paper explores the optimal allocation of funds across firms and the distortions caused by allocating these funds through banks. We show that it can be optimal to allocate funds to the least or most affected firms depending on the underlying distribution of the shock that firms face, the firms’ financial position, and the total budget available for the program. In the model, as ...
Working Papers , Paper 21-16

Working Paper
Student Loan Relief Programs: Implications for Borrowers and the Federal Government

As college costs increase and more students borrow to fund their education, debt load and delinquency rates have become significant problems. Student loan obligations are challenging to manage for new graduates with lower earnings and for borrowers in financial hardship. This paper discusses the various federal student loan repayment relief programs that are available and their borrower and fiscal impacts. The implications for borrowers' costs and the federal budget vary significantly by loan amount, income level, and relief program.
Research Working Paper , Paper RWP 17-2

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