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Study Examines Characteristics of Student-Loan Borrowers Who Default

A study released on Monday by the National Bureau of Economic Research examines the loan-repayment and default outcomes, 10 years after graduation, of students who earned baccalaureate degrees in 1993.

The study looks at differences across individual and family-background characteristics, as well as by factors such as college major, type of institution, debt levels, and post-graduation earnings.

“Among the individual and family-background characteristics, only race is consistently important for all measures of repayment/nonpayment,” the study found. “Ten years after graduation, black borrowers owe 22 percent more on their loans, are 6 (9) percentage points more likely to be in default (nonpayment), have defaulted on 11 percent more loans, and are in nonpayment on roughly 16 percent more of their undergraduate debt compared with white borrowers. These striking differences are largely unaffected by controls for choice of college major, institution, or even student-debt levels and post-school earnings.”

The paper suggests that, given the relatively lower incomes of black families, decreased levels of parental support could partly explain black graduates’ higher nonpayment rates.

The full study is available to NBER subscribers here.

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