Conceptual and Empirical Issues for Alternative Student Loan Designs

The Significance of Loan Repayment Burdens for the United States

Bibliographic Data

ID5741870
AuthorsBruce Chapman (0000-0002-6054-7695, corresponding author), Lorraine Dearden (0000-0002-9529-8860)
Year2017
Volume671
Issue1
Pages249-268
Publication date2017-05-01
Open AccessYes
TypeARTICLE
VenueThe Annals of the American Academy of Political and Social Science (JOURNAL)
Journal identifiersISSN: 0002-7162 • E-ISSN: 1552-3349
PublisherSAGE Publications Inc (PUBLISHER)
DOI10.1177/0002716217703969
OpenAlexW2609052685
LanguageEN
Citations received4
References cited14

In this article, we compare the two main types of student loans used to finance postsecondary education: mortgage-type loans, which are repaid over a set period of time and mainly used in the United States; and income-contingent loans, which are repaid depending on students' future income and used in Australia and England. We argue that the major concern with mortgage-type loans is the repayment burden that falls on students. Repayment burden-the proportion of a debtor's income required to repay loans-is fundamental to the assessment of student loan systems because it affects the probability of students defaulting on loan repayment, and because it bears on debtors' consumption and standard of living. We show that Stafford loans imply extremely difficult financial circumstances for a minority of U.S. loan recipients, and that income-contingent loans can solve those problems. The financial benefits of income-contingent loans are illustrated through a hypothetical student loan experience

Actuarial science · Bridge loan · Business · Consumption (sociology) · Creditor · Cross-collateralization · Debt · Debtor · Default · Economics · Loan · Non-conforming loan · Non-performing loan · Participation loan · Sociology · Student loan · Finance · Financial Literacy, Pension, Retirement Analysis · Higher Education Research Studies · School Choice and Performance

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