Monge-Naranjo (2004) point out that the post-college earnings of African
Americans is lower than that of all other racial/ethnic groups. Institutional type
may also be a factor, as defaulters who attended proprietary institutions cited
unemployment as the cause for default (83%) in higher proportion than
defaulters who attended other types of institutions (Dynarski, 1994).
Debt burden. Research suggests that as debt burden increases so does the
Whatever the type
likelihood of default. In other words, although the average debt burden may
of institution, the
differ by the type of institution attended, whatever the type of institution, the
more a student
more a student borrows the greater the chance of default (Choy & Li, 2006;
borrows the greater
Dynarski, 1994; Lochner & Monge-Naranjo, 2004). Students who attended two-
the chance of default.
year and proprietary institutions in 2003-2004 owed over $38,000 on average
compared to $36,000 among those who attended private four-year schools
(California Postsecondary, 2006). A national study, similarly, found that
students who attended proprietary schools spent a higher proportion of their
monthly income (around 8%) on loan repayments compared to students who
attended four-year schools (about 6%) (Dynarski, 1994).
Manageability of monthly payments is highly correlated with default
(Dynarski, 1994). Students who owed more money reported more difficulties
repaying loans, regardless of default status (Schwartz & Finnie, 2002).
Currently, if monthly debt burden exceeds 8 percent of income, the debt is
considered unmanageable. Choy and Li (2006) noted that 11 percent of
borrowers reported unmanageable debt levels by 2003, with more than 20
percent of these students eventually defaulting. One exception emerged
regarding high debt and likelihood of default: Students who incurred high levels
of debt by attending graduate school were actually less likely on average to
default (Volkwein et al., 1998; Woo, 2002a, 2002b).
College Experiences
Academic enrollment and intensity. Markers of students’ academic experiences in
postsecondary education—credits attempted, credits completed, credit hours
failed, grades, transfer patterns, enrollment patterns, and time to
degree/certificate—emerge as the strongest predictors of loan default. Students
who enroll continuously, enroll in more rather than fewer credit hours,
complete their attempted courses (i.e., do not receive incompletes), and
graduate within eight semesters are less prone to default on average
(Christman, 2000; Harrast, 2004; Steiner & Teszler, 2005). Evidence suggests
that the odds of defaulting increase the longer it takes a student to get through
school, although enrolling continuously may have a stronger positive
relationship with not defaulting than taking longer than eight semesters to
graduate (Podgursky et al., 2002).
Findings regarding academic mobility—reflected in transfer behaviors—and the
likelihood of default in the studies we reviewed were mixed. Woo (2002a,
2002b) found that students who attended more than one institution were less
likely to default than students who remained enrolled at the same institution,
although the study included graduate students, who are generally less likely to
default and often attend multiple institutions. Volkwein and colleagues (1998)
found a positive relationship between receiving transfer credits and not
defaulting, although in a single institutional study Herr and Burt (2005) found
that students who transferred credits were more likely to default.
The relationship between academic trajectories and loan default is complicated,
although at least two clear linkages emerge. First, students who take longer to
24 Journal of Student Financial Aid Volume 39 • Number 1 • 2009
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