In part I of our analysis, we studied the expected debt relief from the CARES Act on mortgagors and student debt borrowers. We now turn our attention to the 63 percent of American borrowers who do not have a mortgage or student loan. These borrowers will not directly benefit from the loan forbearance provisions of the CARES Act, although they may be able to receive some types of leniency that many lenders have voluntarily provided. We ask who these borrowers are, by age, geography, race and income, and how does their financial health compare with other borrowers.
Building upon our earlier Liberty Street Economics post, we continue to analyze the heterogeneity of COVID-19 incidence. We previously found that majority-minority areas, low-income areas, and areas with higher population density were more affected by COVID-19. The objective of this post is to understand any differences in COVID-19 incidence by areas of financial vulnerability. Are areas that are more financially distressed affected by COVID-19 to a greater extent than other areas? If so, this would not only further adversely affect the financial well-being of the individuals in these areas, but also the local economy. This post is the first in a three part-heterogeneity series looking at heterogeneity in the credit market as it pertains to COVID-19 incidence and CARES Act debt relief.
Is Free College the Solution to Student Debt Woes? Studying the Heterogeneous Impacts of Merit Aid Programs
The rising cost of a college education has become an important topic of discussion among both policymakers and practitioners. At least eleven states have recently introduced programs to make public two-year education tuition free, including New York, which is rolling out its Excelsior Scholarship to provide tuition-free four-year college education to low-income students across the SUNY and CUNY systems. Prior to these new initiatives, many states, including New York, had already instituted merit scholarship programs that subsidize the cost of college conditional on academic performance and in-state attendance. Given the rising cost of college and the increased prevalence of tuition-subsidy programs, it’s important for us to understand the effects of such programs on students, and whether these effects vary by income and race. While a rich body of work has studied the effects of merit scholarship programs on educational attainment, the same is not true for the effects on financial outcomes of students, such as debt and repayment. This blog post reports preliminary findings from ongoing work, which is one of the first research initiatives to understand such effects.
Evidence overwhelmingly shows that the average earnings premium to having a college education is high and has risen over the past several decades, in part because of a decline in real average earnings for those without a college degree.