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The Characteristics Associated with Student Loan Default at Texas A&M University


  • 1)

    Texas A&M University borrowers who are successful in college – as measured by a number of variables -- have a much lower likelihood of defaulting on student loans.

  • 2)

    Background variables, like demographic characteristics and financial aid variables, have little connection to default within the context of this study. This finding differs from the conclusions of some previous studies, which found background variables, in particular ethnicity, to be among the most important predictors of default.

  • 3)

    College grade point average has the strongest association to default of any variable in the study. Borrowers with college GPAs of 2.0 or less default at nearly an 18 percent rate. In contrast, borrowers whose GPAs exceed 2.5 have default rates of 2.0 percent or less.

  • 4)

    Borrowers who graduate have less than a 2 percent chance of defaulting, while non- graduates have a 13.7 percent default rate.

  • 5)

    In some cases, different majors have dramatically different default rates. For example Finance majors have a 1.8 percent default rate, but General Studies majors have a 14.7 percent default rate.

  • 6)

    Other important College Success variables are Number of Hours Failed and Number of Hours Passed. Number of Hours Failed could serve as a good early indicator of trouble that might eventually lead to default.

  • 7)

    Of the top eight variables in strength of relationship to default, only one is not a College Success variable: whether or not a borrower received in-person exit counseling. Only a little over 1 percent of borrowers who receive in-person exit counseling default within the two year cohort period, while 11 percent of borrowers who do not receive the counseling default. However, the exit counseling variable is highly correlated with whether borrowers graduate from college; further analysis will be required to determine the independent effect of in-person exit counseling.

  • 8)

    The variables in the Attendance Pattern section generally have the second strongest set of relationships to default, after the College Success variables. Most of the leading variables in the Attendance Pattern section indicate that the longer the borrower is in college, the less likely the borrower is to default. Like the College Success variables, the Attendance Pattern variables measure the performance or the behavior of borrowers during college.

9) Regardless of whether borrowers graduate, the more course hours they successfully complete, the lower their likelihood of default. Thus, efforts to increase student persistence would probably reduce default rates.


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