What Matters in Student Loan Default: A Review of the Research Literature

    Volume 39, No. 1, p. 19 

    by Jacob P. K. Gross, Osman Cekic, Don Hossler, and Nick Hillman

    Federal higher education policy has shifted over the past few decades from grants to lloans as the primary means for providing access to postsecondary education for low and moderate-income families. With this shift, policy makers have begun tracking student loan default rates as a key indicator of the efficacy of student loan programs. This effort requires a closer examination of how to define default and what default signifies: What is an acceptable rate of default? What factors contribute to default? Should default rates be used as indicators of institutional quality or loan program efficacy? These questions lead to further investigation of factors influencing default, such as whether default is a function of the characteristics of students or of the institutions they attend, and whether the types of loans borrowed influence the probabilities of default. To help answer these and related questions, this study reviewed the literature of research on student loan default conducted between 1978 and 2007, and identified 41 of the higher quality studies, the findings of which are summarized here.