Research

I study the redistributional effects of a universal $10,000 student debt forgiveness policy in a heterogeneous-agent overlapping generations model with incomplete markets and discrete housing choices, calibrated to the 2023 SCF data. Debt relief modestly raises aggregate welfare: particularly, benficiaries gain 0.82 percent consumption-equivalent welfare on average, primarily through accelerated homeownership among middle-wealth households. The policy increases housing demand and raises house prices by 0.11 percent, generating general equilibrium effects that benefit older homeowners but harm high-school graduates who face higher housing costs, lower returnss to saving, and weaker gains, compared to college graduates, from market wage rise. College enrollment responds little. Transitional dynamics initially show aggregate welfare losses for new generations due to elevated house prices and later on gains for newer generations as increased housing supply from retiring beneficiaries drives the prices below the steady state level. The results highlight the central role of housing-market channles in shaping distributional effects of government policies.