2002. Did these lower debt levels reduce the odds of defaulting among African
American students during that time? The research is lacking to tell us whether
concurrent policies, such as the 1998 HEA reauthorization, might have had an
impact on student loan default rates.
Findings from Research on student loan default has considered (a) the characteristics of
the Literature: students as they begin college (e.g., family income, race/ethnicity); (b)
What Matters? students’ college experiences (e.g., type of institution, field of study,
educational outcomes); (c) students’ financial aid and the amount of debt they
incur; and (d) students’ employment and income after college as well as their
overall debt (including loans and other forms of consumer debt). Vis-à-vis the
evidence on these factors, we summarize the research on student loan default—
with an eye on this broad question: What matters?
First, we present the findings related to factors on which the literature is
inconclusive or points to no relationship regarding predictors of default. Then,
we discuss in more detail the set of factors that have been found to influence
student default rates.
Institutional Characteristics
Descriptive analysis suggests that students who attend less-than-two-year,
proprietary, or community colleges have higher default rates than their peers at
four-year or more selective institutions (Podgursky, Ehlert, Monroe, Watson, &
Wittstruck, 2002; Woo, 2002a, 2002b), even when the time horizon for
considering default is extended to eight years (Kesterman, 2005). Once borrowing
behaviors, student background characteristics, and institutional resources are
considered, however, these differences largely disappear (Emmert, 1978; Flint,
1997; Knapp & Seaks, 1992; Volkwein & Cabrera, 1998; Volkwein, Szelest,
Cabrera, & Napierski-Prancl, 1998; Wilms, Moore, & Bolus, 1987). Students who
attend proprietary or less-than-four-year institutions tend to borrow more, to
come from lower-income families, and to belong to a racial or ethnic minority
group—characteristics associated with increased likelihood of default (Gladieux
& Perna, 2005; Goodwin, 1991).
Moreover, greater institutional investment and instructional support is associated
with decreased likelihood of default (Volkwein & Szelest, 1995). Generally, the
wealthier the institution attended and the greater the student’s access to social
and economic capital the less likely the student is to default. In addition, some
evidence suggests that students who attend less-than-four-year institutions may be
more likely to carry more credit card debt compared to their peers at traditional
institutions (Pinto & Mansfield, 2006). Finally, a descriptive analysis of default
rates and institutional characteristics found that California students who attended
publicly traded corporations were less likely to default than students attending
other vocational schools (Woo, 2002a, 2002b).
Student Characteristics and Background
Race/ethnicity. Differences among racial and ethnic groups in the likelihood of
default are perhaps the most studied topic in the loan default literature.
Researchers have been remarkably consistent in their conclusions on this
point—finding students of color more likely to default than their Caucasian
peers (Christman, 2000; Harrast, 2004; Volkwein & Cabrera, 1998; Volkwein &
Szelest, 1995; Woo, 2002a, 2002b) and African Americans at the greatest risk of
defaulting (Greene, 1989; Herr & Burt, 2005; Knapp & Seaks, 1992; Podgursky
et al., 2002; Steiner & Teszler, 2003; Wilms et al., 1987) even after controlling
for postgraduation earnings (Boyd, 1997; Lochner & Monge-Naranjo, 2004). In
National Association of Student Financial Aid Administrators 21
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