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decreases in the probability of default. They also determined that a variable signifying that the borrower was a transfer student did not have a significant relationship to default. A related study by Volkwein and Szelest (1995) uncovered similar results with respect to college GPA, majoring in science or technology, and transfer status. Woo (2002) found that attainment of a graduate or professional degree greatly reduces the chances of default. She further established that borrowers who attended more than one school were also less likely to default. (Woo noted that this variable partially reflects the fact that borrowers who go to graduate school have attended more than one school.) Whether or not a borrower studied a business or computer curriculum did not have a significant association to default in Woo’s study. Meyer found that as the academic level attained by a borrower increases, the probability of default decreases.

Researchers have devoted much more attention to demographic variables than to performance factors. In fact, the second most prominent finding of default studies has been that ethnicity/race is strongly related to default (Dynarksi, 1994; Knapp & Seaks, 1990; Podgursky et. al., 2000; Volkwein & Szelest, 1995; Volkwein et. al., 1995; Wilms, Moore & Bolus, 1987; Woo, 2002). In particular, being Black greatly increases the probability of default. In three of the studies (Volkwein & Szelest, 1995; Volkwein et. al., 1995 and Woo, 2002), being Black had the largest effect of all variables, and in the remainder of the cited studies, being Black was the second most influential factor (as measured by the size of coefficients, odds ratios or T ratios).

Previous research has also determined that other demographic characteristics have significant, though mostly smaller, associations to default. After ethnicity, parental income appears to be the most commonly-tested demographic variable, and studies have found higher income levels to be associated with decreases in the probability of default (Dynarksi, 1994; Knapp & Seaks; Volkwein et. al., 1995; Wilms, Moore & Bolus, 1987; Woo, 2002). Gender is also routinely analyzed, and researchers usually conclude that being female is related to a substantial reduction in the likelihood of defaulting (Podgursky et. al., 2000; Volkwein et. al., 1995; Woo, 2002). Podgursky et. al., Woo and Meyer examined the age of the borrower and determined it to have a significant but small effect on default behavior, with increases in age related to higher probabilities of defaulting. In contrast, Knapp & Seaks could not detect a statistically significant relationship for either the gender or age of the borrower. Volkwein and Szelest (1995) also failed to uncover an association between gender and default behavior. Among the other demographic variables that researchers have found to have significant relationships to default are the marital status of parents, (Knapp & Seaks, 1990), U.S. citizenship (Wilms, Moore & Bolus, 1987), the parents’ educational level (Volkwein et. al., 1995), being Hispanic (Dynarksi, 1994; Woo, 2002), having dependents (Dynarksi, 1994; Volkwein & Szelest, 1995; Volkwein et. al., 1995; Woo, 2002), the marital status of the borrower (Dynarksi, 1994; Volkwein & Szelest, 1995; Volkwein et. al., 1995), the borrower’s income (Dynarksi, 1994; Volkwein & Szelest, 1995; Volkwein et. al., 1995; Woo, 2002) and several others.

To a very limited extent, researchers have evaluated characteristics reflecting the borrower’s experience before college. Several studies have found that graduation from high school reduces the likelihood of default (Dynarksi, 1994; Volkwein et. al., 1995; Wilms, Moore & Bolus, 1987 and Woo, 2002). However, Volkwein and Szelest did not detect a significant relationship between having a high school diploma and default behavior. Podgursky et. al. also examined ACT scores and identified a small negative effect on default.

Studies have generally paid scant attention to financial aid-related variables. Nevertheless, it is important to test whether financial assistance mitigates the probability of default in ways that are independent of income. Among the studies reviewed here, only a couple reviewed variables other than family income and family assets. Volkwein et. al. tested several financial aid-related


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