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Report
Financial education and the debt behavior of the young
Brown, Meta; Zafar, Basit; Grigsby, John; Wen, Jaya; Van der Klaauw, Wilbert (2013-09-01)
Young Americans are heavily reliant on debt and have clear financial literacy shortcomings, yet evidence on the relationship between financial education and youths? subsequent debt behavior remains both limited and mixed. In this paper, we study the effects of exposure to financial training on debt outcomes in early adulthood among a large and representative sample of young Americans. Variation in exposure to financial training comes from statewide changes in high school graduation requirements regarding financial literacy, economics, and mathematics that were mandated in the late 1990s and ...
Staff Reports , Paper 634

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

Discussion Paper
Does the CRA Increase Household Access to Credit?
Conway, Jacob; Bucchieri, Erica; Glaser, Jack; Plosser, Matthew (2023-02-27)
Congress passed the Community Reinvestment Act (CRA) in 1977 to encourage banks to meet the needs of borrowers in the areas in which they operate. In particular, the Act is focused on credit access to low- and moderate-income communities that had historically been subject to discriminatory practices like redlining.
Liberty Street Economics , Paper 20230227

Journal Article
Risk of Business Insolvency during Coronavirus Crisis
Kwan, Simon H.; Friesenhahn, Sophia M. (2020-10-05)
Many businesses had amassed high levels of debt, or leverage, before the COVID-19 pandemic. Out of precaution or necessity, firms increased their borrowing further after the onset. Although the shock to those firms’ value significantly increased their risk, measured by their distance-to-default, the default risk remains relatively small for most corporate debt. Nevertheless, the amount of outstanding liabilities among firms with elevated risk of insolvency is more than two times higher than at the peak of the global financial crisis.
FRBSF Economic Letter , Volume 2020 , Issue 30 , Pages 01-05

Working Paper
Killer Debt: The Impact of Debt on Mortality
Argys, Laura; Friedson, Andrew; Pitts, M. Melinda (2016-11-01)
This study analyzes the effect of individual finances (specifically creditworthiness and severely delinquent debt) on mortality risk. A large (approximately 170,000 individuals) subsample of a quarterly panel data set of individual credit reports is utilized in an instrumental variables design. The possibility of the reverse causality of bad health causing debt and death is removed by instrumenting for individual finances post 2011 using the exposure to the housing crisis based on their 2005 residence. Worsening creditworthiness and increases in severely delinquent debt are found to lead to ...
FRB Atlanta Working Paper , Paper 2016-14

Working Paper
Targeted business incentives and the debt behavior of households
Millimet, Daniel; Di, Wenhua (2016-01-01)
The empirical effects of place-based tax incentive schemes designed to aid low-income communities are unclear. While a growing number of studies find beneficial effects on employment, there is little investigation into other behaviors of households affected by such programs. We analyze the impact of the Texas Enterprise Zone Program on household debt and delinquency. Specifically, we utilize detailed information on all household liabilities, delinquencies, and credit scores from the Federal Reserve Bank of New York Consumer Credit Panel/Equifax, a quarterly longitudinal 5% random sample of ...
Working Papers , Paper 1602

Discussion Paper
Some Options for Addressing Puerto Rico’s Fiscal Problems
Clark, Hunter L.; Haughwout, Andrew F.; Orr, James A. (2015-11-03)
Puerto Rico’s economic and fiscal challenges have been an important focus of work done here at the New York Fed, resulting in two reports (2012 and 2014), several blog posts and one paper in our Current Issues series in just the last few years. As the Commonwealth’s problems have deepened, the Obama administration and Congress have begun discussing potential approaches to addressing them. In this post, we update our previous estimates of Puerto Rico’s outstanding debt and discuss the effect that various forms of bankruptcy protection might have on the Commonwealth.
Liberty Street Economics , Paper 20151103

Working Paper
The Rise in Home Currency Issuance
Jones, Peter; Spiegel, Mark M.; Hale, Galina (2014-07)
Using a large sample of private international bond issues, we document a substantial decline in the share of international bonds denominated in major reserve currencies over the last two decades, and an increase in bonds denominated in issuers? home currencies. These secular trends appear to have accelerated notably after the global financial crisis. Observed increases in home currency foreign bond issuance was larger in countries with stable inflation and lower government debt, and in emerging markets that adopted explicit inflation targeting policies. We then present a model that ...
Working Paper Series , Paper 2014-19

Discussion Paper
Do College Tuition Subsidies Boost Spending and Reduce Debt? Impacts by Income and Race
Chakrabarti, Rajashri; Nober, William; Van der Klaauw, Wilbert (2020-07-08)
In an October post, we showed the effect of college tuition subsidies in the form of merit-based financial aid on educational and student debt outcomes, documenting a large decline in student debt for those eligible for merit aid. Additionally, we reported striking differences in these outcomes by demographics, as proxied by neighborhood race and income. In this follow-up post, we examine whether and how this effect passes through to other debt and consumption outcomes, namely those related to autos, homes, and credit cards. We find that access to merit aid leads to an immediate but temporary ...
Liberty Street Economics , Paper 20200708d

Journal Article
Spotlight on Research: Youth Debt and College Graduation
Smith, Marvin M. (2013-01)
The rise in debt among youth to finance their higher education has engendered a great deal of discussion. Much of the attention has been focused on the angst that arises when the debt has to be repaid. This has been especially burdensome on students from lower-income households. While this is worthy of concern, another aspect of the educational-related debt that is being examined is whether the debt was worth it. More specifically, what is the association of the debt with the borrower?s graduation from college? Some investigations not only consider the relationship between educational loans ...
Cascade , Volume 1

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