NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Ankit Kalda

Kelley School of Business
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Indiana University
Bloomington, IN 47405
Tel: (812) 855-1395

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Institutional Affiliation: Indiana University

NBER Working Papers and Publications

May 2019Second Chance: Life without Student Debt
with Marco Di Maggio, Vincent Yao: w25810
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 US. 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, and are 11% less likely to default on other accounts. After the discharge, the borrowers' geographical mobility increases, as well as, their probabil...
 
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