These two studies add important new information to the policy debates regarding student debt. The Yannelis study offers evidence that if policymakers were to end bankruptcy and wage garnishment policies without putting something else in place, defaults would increase substantially. Moreover, the marginal defaulters would be borrowers with the means to repay. One can imagine that in this state of the world policymakers would soon come under pressure to “do something” about elevated default rates caused by borrowers who can repay their loans.

Researchers will find reasons to question the methodology and results.

Bhole shows us that policymakers sometimes solve problems that don’t even exist. The classic justification for a government loan program is that it addresses a market failure in which private lenders are unwilling to provide an optimal amount of credit at reasonable terms. Yet Bhole offers evidence that graduate and professional students had the same access to credit before and after Congress created Grad PLUS.

Bhole’s analysis hints at a compromise on IBR for graduate students. The real value of IBR, she implies, is that it lets borrowers smooth out their repayment burden by linking payments to income, not that it offers debt forgiveness. That means policymakers could maintain the insurance component of IBR without over-subsidizing graduate students with loan forgiveness.

None of this is to say, however, that the Yannelis and Bhole studies are definitive. They are the only studies on these topics and both are working papers.

Read the full article on federal student loan programs by Jason D. Delisle at American Enterprise Institute