get through school often incur more debt. Harrast (2004) found that average
debt load increased $418 per each semester a student is enrolled beyond the first
year and that the median debt load of a student who takes five or more years to
graduate is 58 percent higher than that of a student who graduates in four years
or less. Second, as discussed in more detail in the next section, common
markers of lower levels of academic enrollment and intensity—such as
noncontinuous enrollment and low academic performance—are all associated
with a decreased likelihood of earning a degree, which is also a strong predictor
of default.
Educational attainment. Attainment at both the secondary and tertiary levels of
The majority of
education is perhaps the strongest predictor of loan default. Students who
the research ... suggested
dropped out of high school or earned a GED were more likely to default than
that completing a
students who had earned a regular diploma (Dynarski, 1994; Wilms et al.,
postsecondary program
1987). The majority of the research we reviewed suggested that completing a
is the strongest
postsecondary program is the strongest single predictor of not defaulting
single predictor of not
regardless of institution type (California Postsecondary, 2006; Dynarski, 1994;
defaulting regardless
Greene, 1989; Knapp & Seaks, 1992; Volkwein et al., 1998; Woo, 2002). Steiner
of institution type.
and Teszler (2005) estimated that students who graduated had a 2 percent
chance of defaulting compared to 14 percent for those who did not graduate.
Interestingly, progress toward degree also reduced likelihood of default. At the
start of repayment students who had earned sufficient credits to be classified as
seniors were less likely to default than those who progressed to junior status,
and so on (Herr & Burt, 2005). The relationship between attainment and
default may reflect student sorting, with students who are more prone to
default also being more likely to depart postsecondary education prior to
finishing a degree (Podgursky et al., 2002).
Academic preparation. Given the relationship between degree completion and
likelihood of default, it is not surprising that academic preparation—as
measured by high school rank, high school GPA, and standardized test scores—
is also strongly related to default. Generally, students who are better prepared
academically according to these traditional measures are less likely to default on
their loans. As high school rank, standardized test scores, and high school GPA
increased in the studies we reviewed, the likelihood of default generally
decreased (Christman, 2000; Podgursky et al., 2002; Steiner & Teszler, 2003;
Woo, 2002), although one study found a “U-shaped” relationship between
performance on standardized tests and default (Lochner & Monge-Naranjo,
2004). Low-scoring and high-scoring students were more likely to default than
students with mid-range scores. Finally, Herr and Burt (2005) found that
systematic differences by high school emerged in relation to likelihood of
default, although the authors do not offer a detailed explanation of these
differences.
Program of study. What students study in school appears to affect likelihood of
default in at least two ways, according to the studies we reviewed—in amount
of debt incurred and in postgraduation earnings. Harrast (2004) found that
studying special education, computer engineering, sociology, art history, or risk
management and insurance was associated with higher levels of debt relative to
other fields. This study focused on one institution, however, and the author was
unsure why major affected subsequent debt burden. More evidence exists to
suggest that postgraduation earnings related to field of study affect personal
income and, therefore, one’s ability to repay loans (Flint, 1997; Herr & Burt,
2005; Steiner & Teszler, 2005; Volkwein & Szelest, 1995). Lochner and Monge-
Naranjo (2004) found the effects of major choice disappeared after controlling
for total debt and postcollege earnings. In contrast, Schwartz and Finnie (2002)
National Association of Student Financial Aid Administrators 25
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