Minimizing the Repayment Cost of Federal Student Loans

@article{Guasoni2022MinimizingTR,
  title={Minimizing the Repayment Cost of Federal Student Loans},
  author={Paolo Guasoni and Yu‐Jui Huang},
  journal={SIAM Rev.},
  year={2022},
  volume={64},
  pages={689-709}
}
. Federal student loans are fixed-rate debt contracts with three main special features: (i) borrowers can use income-driven schemes to make payments proportional to their income above subsistence, (ii) after several years of good standing, the remaining balance is forgiven but taxed as ordinary income, and (iii) accrued interest is simple, i.e., not capitalized. For a very small loan, the cost-minimizing repayment strategy dictates maximum payments until full repayment, forgoing both income… 

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