Meredith Welch Financial Consequences of Student Loan Delinquency, Default, and Servicer Quality Abstract: Student loans are now the third largest form of household debt, and nearly 6 million federal student loan borrowers are in default. Student loans cannot be discharged in bankruptcy, and the federal government has unique levers for collecting on defaulted debt, leading to potentially severe financial consequences for borrowers. Using consumer credit panel data, I examine the credit market consequences of student loan delinquency and default and the role that student loan servicers play in contributing to borrower outcomes. I exploit random assignment of student loan borrowers to student loan servicers to study the direct effect of servicers on borrowers’ credit outcomes and to isolate variation in the likelihood of default that is not correlated with borrower characteristics. I find that being assigned to a higher-default servicer increases a borrower’s likelihood of default by approximately 6%. However, there is a precisely estimated null effect of servicer assignment on measures of borrowers’ likelihood of financial distress, credit access, and zip-code characteristics. These findings suggest that averting a servicer-induced default does not yield considerable benefits for marginal borrowers’ credit outcomes, but that servicers are meaningful drivers of student loan repayment outcomes.
Sydnee Caldwell Firm Pay and Worker Search Abstract: Whether and how workers search on the job depends on their beliefs about pay and working conditions in other firms. Yet little is known about workers’ knowledge of outside pay. We use a large-scale survey of full-time German workers, linked to their Social Security records, to elicit pay expectations and preferences over specific outside firms. Workers believe that they face considerable heterogeneity in their outside pay options, and direct their search toward firms they believe would pay them more. Workers’ expected firm-specific pay premia are highly correlated with pay policies observed in administrative records and with workers’ valuations of firm-specific amenities. Most workers are unwilling to search for a new job—or leave their current firm—even for substantial pay increases. Switching costs are equivalent to 40% of a worker’s annual pay. Attachment varies across firms, and cannot be explained by either differences in firm-specific amenities or switching costs.
