00000nam 2200000zi 4500 9.929620 CaOODSP 20231030092004 m o d f cr mn||||||||| 231030t20232023onca ob f000 0 eng d CaOODSP eng rda CaOODSP eng eng fre n-us--- FB3-5/2023-54E-PDF Boutros, Michael, author. Borrow now, pay even later : a quantitative analysis of student debt payment plans / by Michael Boutros, Nuno Clara and Francisco Gomes. [Ottawa] : Bank of Canada = Banque du Canada, 2023. ©2023 1 online resource (iii, 59 pages) : colour illustrations. text txt rdacontent computer c rdamedia online resource cr rdacarrier Staff working paper = Document de travail du personnel, 1701-9397 ; 2023-54 ISSN assigned to different series. "Last updated: October 27, 2023." Includes bibliographical references (pages 39-42). "In the United States, student debt currently represents the second largest component of consumer debt, just after mortgage loans. Repayment of those loans reduces disposable income early in the borrower's lifecycle, when marginal utility is particularly high, and limits their ability to build a buffer stock of wealth to insure against background risks. In this paper, we study alternative student debt contracts that offer a 10-year deferral period. Borrowers defer either principal payments only ("Principal Payment Deferral", PPD) or all payments ("Full Payment Deferral", FPD) with the missed interest payments added to the value of the debt outstanding. We first calibrate an equilibrium with the current contracts, and then solve for counterfactual equilibria with the PPD or FPD contracts. We find that both alternatives generate economically large welfare gains, which are robust to different assumptions about the behavior of the lenders and borrower preferences. We decompose the gains into the percentages resulting from loan repricing and from the deferral of debt repayments. We compare these alternative contracts with the changes to Income Driven Repayment Plans being proposed by the current U.S. administration and show that they dominate such proposals. Crucially, the PPD and FPD contracts deliver similar welfare gains to the debt relief program considered by the administration, with no impact on the government budget constraint"--Abstract, page ii. Includes abstracts in English and French. Student loans United States Econometric models. Consumer credit United States Econometric models. Debt relief United States Econometric models. Prêts d'études États-Unis Modèles économétriques. Crédit à la consommation États-Unis Modèles économétriques. Dettes Allègement États-Unis Modèles économétriques. Bank of Canada, issuing body. Staff working paper (Bank of Canada) 2023-54. (CaOODSP)9.806221 PDF 566 KB https://publications.gc.ca/collections/collection_2023/banque-bank-canada/FB3-5-2023-54-eng.pdf