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An Analysis of the Probability of Default on Federally Guaranteed Student Loans

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  • Knapp, Laura Greene
  • Seaks, Terry G

Abstract

Federally insured student loans constitute an area that is almost completely unexplored by researchers despite intense scrutiny that federally insured loans are receiving after the savings and loan collapse. Based on a probit model of default for two thousand guaranteed student loans, the authors find that individual characteristics (including parents' income, presence of two parents at home, student's graduation, and student's race) have a significant impact on default rates, while institutional characteristics (four year vs. two year college, private vs. public, school size, and individual school dummies) have little significant effect. The results imply that proposals to penalize colleges with "high" default rates are premature. Copyright 1992 by MIT Press.

Suggested Citation

  • Knapp, Laura Greene & Seaks, Terry G, 1992. "An Analysis of the Probability of Default on Federally Guaranteed Student Loans," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 404-411, August.
  • Handle: RePEc:tpr:restat:v:74:y:1992:i:3:p:404-11
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    Cited by:

    1. Rajeev Darolia & Dubravka Ritter, 2020. "Strategic Default Among Private Student Loan Debtors: Evidence from Bankruptcy Reform," Education Finance and Policy, MIT Press, vol. 15(3), pages 487-517, Summer.
    2. Johnathan G. Conzelmann & T. Austin Lacy & Nichole D. Smith, 2019. "Another Day Another Dollar Metric? An Event History Analysis of Student Loan Repayment," Education Finance and Policy, MIT Press, vol. 14(4), pages 627-651, Fall.
    3. Lucas, Deborah & Moore, Damien, 2019. "The student loan consolidation option," Journal of Public Economics, Elsevier, vol. 174(C), pages 1-12.
    4. Adam Looney & Constantine Yannelis, 2015. "A Crisis in Student Loans? How Changes in the Characteristics of Borrowers and in the Institutions They Attended Contributed to Rising Loan Defaults," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(2 (Fall)), pages 1-89.
    5. Rajeev Darolia, 2013. "Student Loan Repayment and College Accountability," Consumer Finance Institute discussion papers 13-5, Federal Reserve Bank of Philadelphia.
    6. Rajeev Darolia, 2015. "Messengers of Bad News or Bad Apples? Student Debt and College Accountability," Education Finance and Policy, MIT Press, vol. 10(2), pages 277-299, March.
    7. Stephen Teng Sun & Constantine Yannelis, 2016. "Credit Constraints and Demand for Higher Education: Evidence from Financial Deregulation," The Review of Economics and Statistics, MIT Press, vol. 98(1), pages 12-24, March.
    8. Ellis Kofi, Akwaa-Sekyi & Portia, Bosompra, 2015. "Determinants of business loan default in Ghana," MPRA Paper 71961, University Library of Munich, Germany.
    9. Gustavo Pereira Serra, 2023. "Household debt, student loan forgiveness, and human capital investment: a neo-Kaleckian approach," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 46(1), pages 173-206, January.
    10. Joselynn Hawkins Fountain, 2019. "The Effect of the Gainful Employment Regulatory Uncertainty on Student Enrollment at For-Profit Institutions of Higher Education," Research in Higher Education, Springer;Association for Institutional Research, vol. 60(8), pages 1065-1089, December.
    11. Goodell, John W., 2016. "Do for-profit universities induce bad student loans?," The Quarterly Review of Economics and Finance, Elsevier, vol. 61(C), pages 173-184.
    12. Boyd, Laura A., 1997. "Discrimination in mortgage lending: The impact on minority defaults in the Stafford Loan program," The Quarterly Review of Economics and Finance, Elsevier, vol. 37(1), pages 23-37.
    13. Jeffery Gunther & Linda Hooks & Kenneth Robinson, 2000. "Adverse Selection and Competing Deposit Insurance Systems in Pre-Depression Texas," Journal of Financial Services Research, Springer;Western Finance Association, vol. 17(3), pages 237-258, September.
    14. Han, Byung-Suk & Kang, Hyoung-Goo & Jun, Sang-Gyung, 2015. "Student loan and credit risk in Korea," Economics Letters, Elsevier, vol. 135(C), pages 121-125.
    15. Kónya, István, 1996. "Családok és iskolák az oktatáspolitika lehetőségei [Families and schools the chances of education policy]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1088-1103.
    16. José Alberto Fuinhas & Victor Moutinho & Estefano Silva, 2019. "Delinquency and Default in USA Student Debt as a Proportional Response to Unemployment and Average Debt per Borrower," Economies, MDPI, vol. 7(4), pages 1-16, October.
    17. Bassanini, Andrea & Brunello, Giorgio, 2008. "Is training more frequent when the wage premium is smaller? Evidence from the European Community Household Panel," Labour Economics, Elsevier, vol. 15(2), pages 272-290, April.
    18. Gaudêncio, João & Mazany, Agnieszka & Schwarz, Claudia, 2019. "The impact of lending standards on default rates of residential real estate loans," Occasional Paper Series 220, European Central Bank.
    19. Perez, G. Guirao & Fernandez, V. Cano & Yurda, M.I. Lopez & Donate, M.C. Rodriguez, 2002. "Socioeconomic Factors and the Consumption of Wine in Tenerife," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24798, European Association of Agricultural Economists.
    20. Rajeev Darolia & Dubravka Ritter, 2015. "Do student loan borrowers opportunistically default? Evidence from bankruptcy reform," Working Papers 15-17, Federal Reserve Bank of Philadelphia.

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