Student Loan Program Research Articles

Equity in the Australian Higher Education System: An Examination of Trends in Policy Affecting the Participation and Outcomes of Higher Education Students

This paper reviews policies affecting domestic students in the higher education system in Australia over the last several decades. It examines the implementation and expansion of Australia’s student loan program and policies to encourage widening participation in the higher education sector among equity or target groups, including those from low socioeconomic backgrounds. Using quantitative data from Australian government and university sources as well as the Household Income and Labour Dynamics in Australia survey, this research seeks to assess whether equity and inclusion in higher education over this period has improved or been maintained. The findings show that while the conditions under which students are able to access higher education in Australia remain relatively generous, the participation rates of equity groups have not substantially improved over the last two decades. Further, the less advantaged circumstances of equity students continue to predict their outcomes prior to and beyond degree completion.

Student Debt Relief and Racial Wealth Gaps

The Biden-Harris Administration released a plan to cancel federal student loans for 43 million borrowers on August 24, 2022. While the Supreme Court struck down the Biden-Harris student debt relief plan on June 30, 2023, the White House is now planning to use the Higher Education Act of 1965, a federal law that governs the student loan program, to bring about relief for student borrowers. This article estimates the potential impact of broad-based student debt relief on racial and ethnic wealth gaps. On average, federal student debt potentially eligible for relief explains 3 percent of the White-Black wealth gaps, suggesting that broad-based student debt relief could significantly mitigate racial wealth inequities.

The Origins of the Student Loan Industry in the United States: Richard Cornuelle, United Student Aid Funds, and the Creation of the Guaranteed Student Loan Program

The Origins of the Student Loan Industry in the United States: Richard Cornuelle, United Student Aid Funds, and the Creation of the Guaranteed Student Loan Program

“They Can Never Take it Away from You”

Abstract This article uses the contradictions and complicity of conclusions to think through the United States’ collective student loan burden while grounding this burden at its historical roots in the mid-twentieth century. In particular, it is concerned with the impasse surrounding the Biden administration's conclusion of the federal student loan payment pause and demands for full student loan debt cancellation. Reading with Lauren Berlant's Cruel Optimism, it suggests that this impasse entails a relation of optimistic cruelty: the active infliction of the affective and material conditions of capital as a means of leverage over oneself and others to maintain a status quo. Attendantly, this article draws attention to the centrality of liquidity/discipline to the conditions of indebtedness within financial capital, highlighting three foundational developments in the emergence of student loan debt: the creation of the Guaranteed Student Loan Program as the country's first universal program of student loans in 1965; the establishment of the Student Loan Marketing Association as a government-sponsored enterprise to provide private liquidity for the federal program in 1972; and the successful push to enact bankruptcy reforms to protect the viability of Sallie Mae from the early 1970s on. The establishment of liquidity/discipline at the industry's inception has allowed student loan indebtedness to flourish into the present and highlights the optimistic cruelty of concluding the federal payment pause to enforce a wholly insufficient status quo.

Improving the quality of Cambodian higher education: Key challenges and suggestions

Higher education is one of the main drivers of economic development. Due to its significant roles, many countries, including Cambodia, have invested in developing their higher education subsector. For over two decades since 1997, Cambodia has experienced a high increase in the number of higher education institutions (HEIs). Despite the rapid institutional expansion, there are many issues impeding the quality of Cambodian higher education. Drawing on secondary sources and the authors’ extensive experience and knowledge of the subsector, this article tries to investigate and explain some of the factors affecting the quality of higher education in Cambodia. The article focuses on several issues, including political interference, fragmented governance structures, ineffective ministerial policy implementation, fragmented institutional management, limited quality of teaching personnel, low academic salaries, business-oriented higher education, and issues concerning curriculum and academic programs. The article offers some suggestions to address these challenges. Key suggestions include (a) limiting political interference in appointing top university leaders, (b) setting up effective and independent higher education quality assurance bodies, (c) creating a term limit for top university leadership roles, (d) establishing a meritocracy-based policy for university leader appointments, (e) making academic salaries comparable to those of other similar professions, (f) developing policies on minimum tuition fees and student loan programs, and (g) introducing mechanisms to improve curricula and promote enrollments in science, technology, engineering, and mathematics (STEM) majors. The article concludes with suggestions for future research.

A “Multiracial Injustice”: Americans’ Changing Ideas About Borrowing for College

Massachusetts Representative Ayanna Pressley was one of many progressive Democrats denouncing student debt as a “multigenerational, multiracial injustice” in the new millennium. She joined researchers, activists, and frustrated borrowers in pointing out that federal student loan programs disproportionately left people of color, especially women, drowning in college debt.

The Effects of Higher Student Loan Limits on Access to High-Earnings Graduate Programs

Graduate student debt is the predominant form of financial aid for postbaccalaureate students and represents almost half of outstanding student debt, yet little is known about the effect of publicly funded graduate loans on student outcomes. To fill this gap, we examine the creation of the federal Graduate PLUS Student Loan program, which effectively eliminated loan limits for graduate students. Using a difference-in-difference identification strategy and administrative data on graduate students entering public and nonprofit universities in Texas, we show that access to additional liquidity through Grad PLUS had no effect on underrepresented students' access to high-earnings graduate programs.

The Insurance Implications of Government Student Loan Repayment Schemes

We use new administrative data that link detailed information on Canadian student loan recipients with their repayment and income histories from the Canada Student Loans Program, income tax filings, and postsecondary schooling records to measure the extent to which student borrowers adjust loan repayments to insure against income variation. Loan payments are shown to increase in income, more so in early years and for individuals with higher initial debt. We estimate that on average an unexpected $1,000 change in annual income is associated with a $30 change in loan payment. Loan repayments are also used to absorb persistent income variation.

Who borrows, and how much? Student borrowing across post-secondary pathways in Ontario, Canada

ABSTRACT The development of cost-efficient pathways is a topic of increasing political and scholarly interest across many North American jurisdictions. It has been suggested that ‘seamless’ transfer pathways can provide financial savings to both students and taxpayers. However, such claims are typically based on hypothetical cost calculations, as opposed to empirical analysis. Through this study, we model the relationship between student pathways and borrowing behavior in Ontario, Canada – the country’s most populous province – using Statistics Canada’s novel Education and Labour Market Linkage Platform (ELMLP). Our models produce little evidence that touted transfer pathways systematically reduce either (i) students’ propensity to borrow from the Canada Student Loans Program (CSLP), or (ii) the total amount that graduates end up borrowing from the program. We identify the implications of these findings for both policymakers and scholars of social stratification.

The Lasting Effects of the Pandemic on Graduate and Professional Education

The coronavirus pandemic caused a shift in the American higher education system. Many institutions switched from in-person to virtual platforms. Since graduate and professional students are more likely than undergraduate students to enroll in a hybrid or online program, they were less affected by the transition to online education. However, the decrease in undergraduate enrollment during the pandemic further squeezed institutional finances showing a decline in international graduate enrollment in the United States. As universities place additional scrutiny on program finances, departments will face pressure to reduce the number of assistantships that are not supported by external grants and contracts, which will disproportionately affect international enrollment. Additionally, the large graduate and professional student loan debt and benefits they receive from repayment plans are issues. Congress and the U.S. Department of Education may pursue efforts to limit the benefits that graduate and professional students receive from the federal student loan program.

APPLY SOME THEORETICAL CONTENTS TO ASSESS THE MANAGEMENT OF STUDENT LOAN PROGRAMS IN VIETNAM

Student loan program is a form of cost-sharing in higher education which has been very popular in many countries around the world, including Vietnam. Due to the specificity of the content and profession, the management of the student loan programs includes a large number of contents and requires the management coordination of many parties, in which the participation of the educational management agencies and higher education institutions is indispensable. This practice leads to the need for research in educational management contents of the student loan program. From this rationale, this study researches fundamental theoretical basis for managing the student loan program. The study then applies theoretical basis to assess basically the programs and program management in Vietnam. On that basis, the study proposes a number of program management solutions in order to ensure equality in accessing higher education in the context of university autonomy.

Innis Lecture: Returns on student loans in Canada

AbstractThis paper uses new administrative data with detailed borrower information and lengthy repayment histories from the Canada Student Loans Program (CSLP) to measure rates of return on undergraduate student loans. We document substantial heterogeneity in returns based on information available at the time loans were disbursed, including province of residence, field of study and institution of attendance. Field of study is a particularly important determinant of rates of return, explaining 22% of the variation in predicted returns across borrowers. We explore the implications of this variation for CSLP cross‐subsidization across borrowers and potential risk‐based loan limits. Given the variation in ex ante predicted returns across borrowers, using all available information at the time of loan disbursement, we study the implications of potential cream‐skimming of high‐return borrowers by private lenders.

Parental Support, Savings, and Student Loan Repayment

Using unique survey and administrative data from Canada, we document that parental support and personal savings substantially reduce student loan repayment problems. Developing a model of student borrowing and repayment, we show that nonmonetary costs of applying for income-based repayment assistance are critical to understanding our findings. Furthermore, we show that eliminating these costs may be inefficient. Empirically, we show that expanding Canada’s Repayment Assistance Plan to automatically cover all borrowers could reduce program revenue by half over early repayment years. Finally, we show how student loan programs can be more efficiently designed. (JEL G51, I22, I23, I28)

Brief of Amici Curiae Consumer Bankruptcy and Student Loan Academics in Support of Petitioner

To interpret the open-ended phrase “undue hardship,” courts must look not just to the goals of the nondischargeability provision in isolation, but also to the broader purposes of Title IV of the Higher Education Act (HEA), the statutory scheme governing federal student loans. Over 90 percent of outstanding student loans were made under Title IV programs, nondischargeability was originally adopted as an amendment to the HEA, and the Brunner test itself purports to be based on the “purposes of the guaranteed student loan program.” In re Brunner, 46 B.R. 752, 756 (S.D.N.Y. 1985), aff’d, 831 F.2d 395 (2d Cir. 1987). Overly stingy application of the undue-hardship provision undermines the expressly articulated overarching goals of the federal student loan programs. Fear of debt and student debt itself deter students, particularly low-income students, from starting and completing higher education. Unmanageable debt discourages borrowers from using their education for the economic benefit of society because their earnings simply go to creditors. Fear of financial distress distorts students’ career choices. Many student loans are harmful to borrowers, who would have been better off never borrowing for higher education. By denying borrowers escape from debts they cannot repay, nondischargeability exacerbates all these effects, each of which undermines a goal of Title IV. The Brunner decision imagines a harsh “quid pro quo” in which the federal government “exacts” a price of near-total nondischargeability in exchange for making student loans. Brunner, 46 B.R. at 756. Although the Brunner opinion asserts that this arrangement advances the purposes of the student loan programs, it cites no evidence of the programs’ aims and ignores their true goals. The same is true of the Fifth Circuit’s decisions adopting and applying Brunner. These decisions are thus fundamentally flawed. To be sure, Congress did limit the dischargeability of student loans, despite the tension between nondischargeability and the goals of the student loan programs. It thought doing so would combat abuse and enhance repayment. But the limit on dischargeability contains an “undue hardship” exception of uncertain scope. In applying that exception, courts should act not just to fight abuse and recover money but also to advance the education-promoting goals of the overall statutory scheme.

Return on Student Loans in Canada

This paper uses new administrative data with detailed borrower information and lengthy repayment histories from the Canada Student Loans Program (CSLP) to measure rates of return on undergraduate student loans. We document substantial heterogeneity in returns based on information available at the time loans were disbursed, including province of residence, field of study, and institution of attendance. Field of study is a particularly important determinant of rates of return, explaining 22% of the variation in predicted returns across borrowers. We explore the implications of this variation for CSLP cross-subsidization across borrowers and potential risk-based loan limits. Given the variation in ex ante predicted returns across borrowers, using all available information at the time of loan disbursement, we study the implications of potential cream-skimming of high-return borrowers by private lenders.

Market Credit v. Borrower Rights: Reforming Student Loans

The federal student loan program is a disaster. Over five million people are in default even though Congress provides all borrowers with the right to affordable payments and to discharge of borrowers’ debts in specific circumstances. Many student loan borrowers who could benefit from these rights are unaware they exist or are unable to exercise their rights. This Article examines the dynamics and incentives that drive the longstanding problem of high default rates and repayment distress among student loan borrowers. Our core finding is that the Education Department adopts a creditors-rights framework for student loan repayment, which is inapposite for student loans because borrowers have unique, federal rights that are unavailable in market credit transactions. We then demonstrate why the mission and track record of the Education Department, including its failure to manage and oversee servicers, make it unlikely that the Department would ever adopt a borrower-rights focus on student loan repayment. We build the case for the creation of the Student Borrower Protection Agency, modeled in part on the Consumer Financial Protection Bureau (CFPB). The function of the SBPA would be to serve student loan borrowers. Just as the country needed the CFPB to fill regulatory gaps in consumer financial protection, we need an agency that will deliver to student loan borrowers the rights promised under federal law.

Bankruptcy as Consumer Protection: The Case of Student Loans

Over 300,000 student loan borrowers have applied to the Department of Education for administrative relief from federal student loans on the ground that they were deceived or otherwise victimized by their schools. The Department adopted relatively borrower-friendly rules for this process in 2016. But under the new administration, the Department changed course and adopted new rules that make it “nearly impossible” for student borrowers to prevail. After a presidential veto of a resolution that would have stopped the new rules, they went into effect on July 1, 2020. With victimized students effectively deprived of administrative relief, bankruptcy provides at least a partial solution. Many such borrowers will be candidates for bankruptcy: The median loan default rate at for-profit colleges sued or investigated for wrongdoing against students is estimated at 31 percent. To get bankruptcy relief, a debtor must show that repayment would cause “undue hardship.” Courts currently do not consider school wrongdoing in assessing undue hardship; this article argues that they should. When repayment will entail some hardship and the borrower’s decision to incur the student loan was induced by the school’s deceptive representations or unfair, abusive, or unconscionable practices, bankruptcy courts should provide relief. They should discharge at least the amount of the loan corresponding to the difference between the cost of the schooling and any value the loan holder can prove the education actually had. Considering school misconduct is consistent with the policies underlying non-discharge-ability of student loan debt because victimized students are not abusing the system when they seek relief and because collection from them is unlikely to be cost-effective. Moreover, discharge advances the goals of the student loan program. It might be objected that the federal government is not itself a wrongdoer in school-misconduct cases, so it should not bear losses arising from bankruptcy discharge of federal student loans. But the FTC’s Holder Rule has provided since 1976 that consumer lenders are responsible for sellers’ misconduct in analogous situations. The assumptions underlying the Holder Rule are met in student-loan cases. As between the two innocent parties, government and student, the government is both better able to absorb school-misconduct losses. The government is also better situated to prevent such losses due to its extensive supervisory powers over schools.

Rising student loan burdens and what to do about them

Student loans help many individuals obtain higher education that they otherwise could not fund, but concerns have arisen in recent years about the large number of borrowers that appear to be struggling to make their payments. This article considers the economic consequences of excessive student debt. It then turns to policy options for relieving excessive debt burdens—most notably, the debate over student debt forgiveness and ways to change the federal student loan program to limit the number of new borrowers that will struggle to make debt payments.

Student Loan Purpose and the Brunner Test

This Article offers a new rationale for making student loans more readily dischargeable in bankruptcy: Doing so advances Congress’s purpose in creating federal student loan programs in the first place. Empirical research indicates that if it is too hard to discharge loans in bankruptcy, students are less likely to pursue higher education, more likely to drop out, less likely to consider lower-income but valuable career paths, and more likely to be harmed rather than aided by their student loans. All these effects undermine Congress’s express aims for the student loan programs. Courts have ignored Congress’s larger purpose in setting the standard for student-loan dischargeability. Specifically, in construing the Bankruptcy Code’s requirement that a debtor show “undue hardship” to get a discharge of student loans, the court that announced the prevailing Brunner test and many courts following it have focused narrowly on furthering the purposes of the specific provision that makes student loans harder to discharge than most other debts. They have not, in interpreting the open-ended “undue hardship” requirement, been guided by the overarching purposes of the student loan programs. As a result, “undue hardship” is often interpreted too harshly, hindering federal student loan programs from accomplishing their purposes. The Article proposes a replacement for the Brunner test that would align the interpretation of “undue hardship” more closely with Congress’s goals. The Article suggests that undue hardship should be presumed to exist when the debtor cannot repay student loans in a reasonable (10-20 year) period of time while maintaining a middle-class standard of living. The presumption could be rebutted by a showing that the debtor is engaged in the opportunistic abuse that Congress tried to combat by restricting discharge. The proposal would further Congress’s student-loan program goals of expanding the middle class and moderating the length of time borrowers are in repayment. The Article concludes by observing that considering the overarching purposes of the student-loan programs as it proposes does not just support its specific suggestion, but also offers a new basis for adopting other recent proposals for liberalizing student-loan dischargeability.

The Effect of the Availability of Student Credit on Tuition: Testing the Bennett Hypothesis Using Evidence from a Large-Scale Student Loan Program in Brazil

We test whether the availability of student loans increases tuition costs, the Bennet Hypothesis. Starting in 2010, there was a major ramp-up in the FIES, a student loan program funded by the Brazilian federal government. FIES’s rules for eligibility produce a marked heterogeneity in the access to funding in different higher education institutions. We take advantage of these rules and of an unique dataset with information on tuition costs at the major-college level, and document two facts. Using a difference-in-differences approach, we show that relaxing access to student loans caused an increase in tuition fees. We also estimate a structural model of demand, and show that relaxing credit constraints reduces the demand price elasticity. Thus the mechanism behind the increase in tuition costs is an increased tuition insensitivity, at least in part.