Student Loan Borrowing and Repayment Decisions

Abstract

This chapter outlines an ambitious agenda for future research to continue deepening our understanding of student loan borrowing and repayment decisions, as well as the consequences of student loan policies. Because risk is such a prominent feature in borrowing and repayment decisions, it is only natural that the pillar of our analysis is the set of contingencies that borrowers face. In delinquency and default, borrowers who have failed to make payments for a period of time may face financial penalties and might also experience psychic costs. The chapter provides a foundation for analyzing borrowing and repayment decisions by overviewing the student loan program as a whole. It also provides an overview of the student loan program with a focus on federal student loans, the major source of funding for college education in the United States. The majority of student loan funds were borrowed through the federal student loan program, with a small share consisting of private student loans.