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Who Mismanages Student Loans, and Why?

Author

Listed:
  • Kimberly Cornaggia
  • Han Xia

Abstract

Many financially distressed students who qualify for federal assistance plans with interest moratorium and principal forgiveness instead accrue interest over long periods of nonpayment. This loan mismanagement is associated with higher delinquency. Mismanagement varies significantly across student gender and race: it is more prominent among male and non-white students. Mismanagement also varies across loan servicers, depending on proxies for student-adverse servicer policies. We consider explanations based on student selection and servicer treatment for loan mismanagement. Student financial literacy plays an important role but variation in treatment on the part of loan servicers appears more important.Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online

Suggested Citation

  • Kimberly Cornaggia & Han Xia, 2024. "Who Mismanages Student Loans, and Why?," The Review of Financial Studies, Society for Financial Studies, vol. 37(1), pages 161-200.
    • Handle: RePEc:oup:rfinst:v:37:y:2024:i:1:p:161-200.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhad058
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    More about this item

    Keywords

    D14; H52; H81; I22; I28;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy

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