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Factors Affecting the Repayment of Student Loans

Author

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  • Kapsalis, Constantine

Abstract

This study shows that the ability of students to repay their Canada Student Loan Program (CSLP) depends primarily on their future earnings rather than on the size of debt incurred. In fact, the amount of debt does not appear to have much of an effect, except when high loan amounts are combined with low incomes. In the case of those who consolidated in 1994-95, the loan amount had an effect on default rates only when it was greater than $20,000 (federal CSLP portion) and the income of the students was lower than $40,000. The relationship between income and default emerges soon after graduation and is a strong predictor of the final repayment outcome. Moreover, future earnings, as well as the probability of loan repayment, are strongly correlated with the type of education (type of degree, field of study, and type of institution). The type of program and local labour market conditions can be used to predict the risk of default of loans.

Suggested Citation

  • Kapsalis, Constantine, 2006. "Factors Affecting the Repayment of Student Loans," MPRA Paper 25755, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:25755
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    File URL: https://mpra.ub.uni-muenchen.de/25755/1/MPRA_paper_25755.pdf
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    Cited by:

    1. repec:hka:wpaper:2013-20 is not listed on IDEAS
    2. Lance Lochner & Todd Stinebrickner & Utku Suleymanoglu, 2013. "The Importance of Financial Resources for Student Loan Repayment," Working Papers 2013-020, Human Capital and Economic Opportunity Working Group.

    More about this item

    Keywords

    student loans; post-secondary education;

    JEL classification:

    • I21 - Health, Education, and Welfare - - Education - - - Analysis of Education

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