Tuesday, March 14, 2017

Lit. Review #4

Looney, Adam, and Constantine Yannelis. “A Crisis in Student Loans?: How Changes in the Characteristics of Borrowers and in the Institutions They Attended Contributed to Rising Loan Defaults.” Brookings Papers on Economic Activity, vol. 2015, no. 2, 2015, pp. 1–89., doi:10.1353/eca.2015.0003.

In this article, A Crisis In Student Loans?: How Changes in the Characteristics of Borrowers and in the Institutions They Attended Contributed to Rising Loan Defaults, Looney and Yanellis speak about, well, exactly what the title is. There is driving research over the last few decades that indicate a rise in the prominence of the for-profit sector of universities in addition to the how and why students borrow loans adds up to the worst crisis this country has seen involving higher education and the ever growing field of student loans and ever growing debt pool of student debt. Clearly seen through research, student loan default rates are much higher from students who are either: low on their/their families income bracket, and/or attend for-profit institutions. The reason they default can be attributed to the same couple of factors that I have been seeing over and over again in my research: they attend for-profit institutions focused on...profit, they are left with useless prospects after schooling, and also left with few to no opportunities in the work force after schooling is completed. As time has moved forward, so has the for-profit higher education industry. Enticing students to sign up with bonuses and features, students are lulled into a false sense of security by for-profits, making them feel as if they have a strong fighting chance when they graduate with their degree. Contrary to what they were told, they graduate their chosen institution with thousands of dollars of debt and a pretty useless degree. The real jobs to be had in today's market all go to students who have graduated from public and private universities with even low levels of prestige and a marketable degree.

Adam Looney is Deputy Assistant Secretary for Tax Analysis at the U.S. Treasury. In that role, he advises the Secretary on economic issues related to tax policy, analyzes current and proposed legislation, and provides the official receipts forecasts and revenue estimates for the Administration’s budgets. Prior to joining the Treasury, he served as the Policy Director of The Hamilton Project, and was Senior Fellow in Economic Studies at the Brookings Institution. Previously, Looney served as the senior economist for public finance and tax policy with the President's Council of Economic Advisers and was an economist at the Federal Reserve Board. He received a PhD in economics from Harvard University and a BA in economics from Dartmouth College.

Constantine Yannelis joined New York University Stern School of Business as an Assistant Professor of Finance in July 2016. Professor Yannelis conducts research in finance and applied microeconomics. His research focuses on consumer finance, public finance, human capital and student loans. His recent research explores repayment, information asymmetries and strategic behavior in the student loan market. Professor Yannelis’ academic research has been featured in The Wall Street JournalFinancial TimesThe New York TimesThe Washington PostThe EconomistBloombergForbes and other media outlets. Before joining NYU Stern, Professor Yannelis worked at the United States Department of the Treasury, the Organization for Economic Cooperation and Development, the United Nations and the Federal Reserve Bank of Chicago as an Associate Economist. He received his B.A. in Economics and History from the University of Illinois at Urbana-Champaign and his M.A. in Applied Mathematics from Université de Paris I: Panthéon-Sorbonne. He holds a Ph.D. in Economics from Stanford University.
The first key idea spoken about by Looney and Yanellis that seems prevalent to my research is this strong, connected relationship between: -type of school attended and -loan non-repayment. Students at for-profits and 2 year universities have much higher rates of default simply because the students who choose to attend those types of institutions are generally from low income families, are older than traditional borrowers, come from a disadvantaged living area, and have worse labor market outcomes after schooling is completed. 
A second key idea would be somewhat repetitive, but it definitely stems from the first key idea. There has been progress since 2008, the beginning of the Great Recession. But there is still going to be uncertainty heading forward about what will actually happen with higher education, and more specifically, the policies put in place that will either help or hurt for-profit institutions taking advantage of the less-affluent.
"With poor labor market outcomes, few family resources, and high debt burdens relative to their earnings, default rates skyrocketed" (Looney et al. 2). 
"The fact that new borrowing exceeds new enrollment at for-profit institutions, and that the ratio increased so rapidly among 2-year public students, and increased rapidly relative to the number of active borrowers is also important because it indicates that the level of churn through such institutions increased. As a result, for a given level of enrollment, there were a disproportionately large number of new borrowers being produced" (Looney et al. 15).
"In all, the rise of non-traditional borrowing shifted the composition to borrowers more likely to struggle with their loan burdens—toward older, mid-career borrowers; borrowers from more disadvantaged family backgrounds and poorer neighborhoods; and toward programs many were less likely to complete" (Looney et al. 20).
This research would definitely be considered more help towards supplemental research and data. While there is not necessarily any strong theory to be considered, the theory they are using is theory that I am familiar with and have been seeing in my other research. For example, all three quotes provided have more to do with statistical data than theory, but that will still be very helpful for me when needing a quote containing important data for my paper. 

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