fact, race/ethnicity emerges as one of the strongest predictors of default
(Harrast, 2004). For example, one study conducted at a traditional four-year
public institution found that race/ethnicity explained about 20 percent of the
variance in loan default, second only to degree completion (26%) (Herr & Burt,
2005). The relationship between race/ethnicity and likelihood of default holds
regardless of the institutional type (Dynarski, 1994). Finally, in addition to being
more likely to default on student loans, it appears African American students may
be less likely to resume repayment after defaulting compared to their Caucasian
and Asian American counterparts (Volkwein et al., 1998).
Despite much evidence suggesting students of color are more likely to default
than their Caucasian peers, relatively little is known about the constellation of
factors that likely contribute to this difference. To begin, students of color are
more likely to borrow during school because of personal, family, employment, or
institutional finances and can incur greater debt loads by the time they graduate
(Harrast, 2004; Wilms et al., 1987). After graduation, moreover, students of color
are more likely to be unemployed and less likely to be satisfied with their
educational experiences (Volkwein et al., 1998), possibly leading to diminished
capacity to repay loans—although as mentioned above the reasons for default
extend beyond the ability to pay. For example, Boyd (1997) suggests that student
loan default may be linked to discrimination in housing markets. Facing
discrimination in the housing market regardless of one’s earned degree or one’s
credit worthiness could reduce the incentive to protect credit scores by repaying
loans.
Nearly all studies Age. Nearly all studies that considered the age of the student—either while
that considered the enrolled in school or at the start of the loan repayment period—concluded that as
age of the student ... age increases so does the likelihood of loan default, even after controlling for
concluded that as age other important factors such as income (Christman, 2000; Flint, 1997; Harrast,
increases, so does the 2004; Herr & Burt, 2005; Podgursky et al., 2002; Steiner & Teszler, 2005; Woo,
likelihood of loan
2002a, 2002b). Just one study—of a single traditional four-year public institution
default, even after
(Steiner & Teszler, 2003)—had contrasting results, finding younger students three
controlling for other
times more likely to default than older students. A later study by the same
important factors
researchers at the same institution, however, did not reproduce this finding.
such as income.
Several explanations for this negative relationship between age and student loan
repayment emerge from the research literature. Herr and Burt (2005) suggest that
older students likely have greater financial obligations—such as families to
support—that may compete with or prohibit loan repayment, while younger
students have relatively fewer financial commitments. A second explanation
pertains to the overall debt burden a student faces once repayments start. Harrast
(2004) found that on average each year of age added $312 to the student’s
cumulative debt load. Other research suggests the likelihood of default increases
along with the total amount owed (Choy & Li, 2006). In sum, older students may
be more likely to default because they owe more than their younger counterparts
and because they may have relatively less in available resources to repay the loans.
Gender. The relationship between gender and loan default is much less clear in the
literature. Several studies we reviewed found no significant difference in the
likelihood of default between men and women (Harrast, 2004; Volkwein &
Szelest, 1995; Wilms et al., 1987), even after considering women’s comparatively
lower average earnings and greater repayment problems (Schwartz & Finnie,
2002). More recent work suggests women take longer to repay loans (Choy & Li,
2006), and a number of studies found evidence that men are more likely than
women to default on loans (Flint, 1997; Podgursky et al., 2002; Woo, 2002a,
2002b).
22 Journal of Student Financial Aid Volume 39 • Number 1 • 2009
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