A new study (abstract available here) from the National Bureau of Economic Research tracks 10 year student loan default rates for those who earned bachelor's degrees in 1993. The study warns against common assumptions about who may default. "Given the importance of post-school earnings for repayment, it is natural to expect that differences in average earnings levels across demographic groups or college majors would translate into corresponding differences in repayment/nonpayment rates, but this is not always the case," the report says.
"Despite substantial differences in post-school earnings by race, gender, and academic aptitude, differences in student loan repayment/nonpayment across these demographic characteristics are, at best, modest for all except race." And while default rates for black students are higher than those of other groups, the study finds, this could be linked to lower levels of family income, since higher levels of family income have been found to minimize default rates.
Lower debt levels and higher income do predict loan repayment status, the report finds. "As a ballpark figure for all repayment/nonpayment measures, an additional $1,000 in debt can be roughly offset by an additional $10,000 in income," the study says. "For example, an additional $1,000 in student debt increases the share of debt in nonpayment by 0.3 percentage points, while an extra $10,000 in earnings nine years after graduation reduces this share by 0.4 percentage points."
- Flawed Loan System
- A Bit More on 'Gainful Employment'
- A Better Way to Borrow
- New College Board report shows continued borrowing decline and slow net price increase
- Jeb Bush unveils higher education plan with focus on federal loan overhaul
- Australian work force is 'over educated'
- Lower Scores, Fewer Students
- Effecting Change on Default Rates
Search for Jobs