A group of researchers from the Federal Reserve Bank of New York have sought out determine the impact of different variables on whether someone defaults on their student loan debt.
For example, does the type of college that the individual attended impact default rates? Or, whether the type of degree matters? Or, if the individual dropped out of college?
The researchers looked at individuals who were born between 1980 and 1986 and tracked their student loan payments as those individuals aged.
When it comes to the type of institution that was attended, perhaps not surprisingly, those who went to private, for-profit institutions have the highest default rates, followed by those who went to public institutions and then those who went to private, nonprofit colleges of universities. From the researchers:
While this largely reflects the higher earnings prospects enjoyed by four-year students, it also partly reflects the earlier start of the loan repayment period for two-year students and inherent differences between two- and four-year students.
When it comes to the type of degree, not surprisingly, college dropouts, whether they were seeking an Associate or seeking a Bachelor’s degree, have higher default rates than students who graduate. Somewhat interesting is that dropouts who were seeking a Bachelor’s degree have a higher default rate until the students reach about age 29, at which point the default rate among dropouts who were seeking Associate degrees spikes.
Among graduates, those with Associate degrees have significantly higher default rates than those with Bachelor’s degrees.
Finally, the default rates for individuals who lived in ZIP codes below a median income of $55,000 are higher than those who were living above that income line.
Our data show that students who drop out before earning a degree, enroll in an associate degree program as opposed to a bachelor’s degree program, major in the arts, attend a for-profit institution, community college or non-selective college, or come from a less advantaged family background are more likely to default by their late twenties compared to their peers..
