Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • 2019
  • Working Paper

Second Chance: Life Without Student Debt

By: Marco Di Maggio, Ankit Kalda and Vincent Yao
  • Format:Print
  • | Language:English
ShareBar

Abstract

Rising student debt is considered one of the creeping threats of our time. This paper examines the effect of student debt relief on individual credit and labor market outcomes. We exploit the plausibly random debt discharge due to the inability of National Collegiate, the largest owner of private student loan debt, to prove chain of title for thousands of loans across the United States. Using hand-collected lawsuits filings matched with individual credit bureau information, we find that borrowers experiencing the debt relief shock reduce their indebtedness by 26%, by both reducing their demand for credit and limiting the use of existing credit accounts. They are also 12% less likely to default on other accounts. After the discharge, the borrowers' geographical mobility increases as well as their probability to change jobs. Ultimately their income increases by more than $4,000 over a three-year period, which is equivalent to about two months' average salary. These findings speak to the benefits of intervening in the student loan market to reduce the consequences of debt overhang problems by forgiving student debts.

Keywords

Student Debt; Private Student Loans; Legal Settlement; Mobility; Debt Collection; Debt Relief; Borrowing and Debt; Personal Finance; Outcome or Result; United States

Citation

Di Maggio, Marco, Ankit Kalda, and Vincent Yao. "Second Chance: Life Without Student Debt." NBER Working Paper Series, No. 25810, May 2019. (Revise and Resubmit to The Journal of Finance.)
  • SSRN
  • Read Now

About The Author

Marco Di Maggio

Finance
→More Publications

More from the Authors

    • March 2022
    • Faculty Research

    Esusu: Solving Homelessness Backwards

    By: Marco Di Maggio and Emily Williams
    • October 2021 (Revised February 2022)
    • Faculty Research

    Esusu: Solving Homelessness Backwards

    By: Marco Di Maggio, Emily Williams and Eren Kuzucu
    • October 2021
    • Faculty Research

    Coinbase: The Exchange of the Cryptos

    By: Marco Di Maggio and Wenyao Sha
More from the Authors
  • Esusu: Solving Homelessness Backwards By: Marco Di Maggio and Emily Williams
  • Esusu: Solving Homelessness Backwards By: Marco Di Maggio, Emily Williams and Eren Kuzucu
  • Coinbase: The Exchange of the Cryptos By: Marco Di Maggio and Wenyao Sha
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Digital Accessibility
Copyright © President & Fellows of Harvard College