Student loan debt has grown quickly over the last decade to become the largest category of non-housing debt among American households. Several prominent politicians have advocated cancelling all student loan debt. In this paper I argue that the possibility of debt cancellation has made borrowers hesitant to pay back their debt, further exacerbating the crisis and leading to more political support for debt cancellation. In a simple calibration targeting the growth of student loan debt from 2003-2018, I find that the probability of student loan debt cancellation is 28.5%.
|Status||Udgivet - 2020|