From the Web: ‘Who is More Likely to Default on Student Loans?’

Default rates vary based on college choice, family background and other demographic characteristics among consumers.

11/29/2017 10:00 AM

From the Web: ‘Who is More Likely to Default on Student Loans?’

How do characteristics of college students, such as school type, major and family background, relate to default on student loans? Researchers from The Federal Reserve Bank of New York sought to find those answers by comparing default rates among college majors, college type and students’ graduation status.

In their findings, the researchers determined students who attended private for-profit colleges have the highest default rates after their mid-20s. However, students of every age at four-year private not-for-profit schools have the lowest default rates.

“Interestingly, though the difference in default rates between two-and four-year private college students is not large (less than 5 percentage points at age 33), this is not the case for public college students. Default rates for community college (two-year public college) students are nearly 25 percentage points higher than those for their counterparts in four-year public colleges,” according to the Fed researchers.

Their overall findings are preliminary evidence that future financial outcomes for consumers with student loans, such as the ability to buy a home, may fluctuate widely based on their education choices and family backgrounds, according to their report.

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