A Review of the Literature What Matters to Student Loan Default Project on Academic Success

engaging in practice- and policy-oriented research on student success in higher education Federal higher education policy began to shift its emphasis from grants to loans as a means of providing financial assistance to low- and moderate-income students as early as the mid-1970s. The reauthorization of the Higher Education Act (HEA) in 1980 with the budget policies of the Reagan administration introduced the PLUS loans that resulted in a significant shift in the emphasis of the federal government from grants to loans as the primary policy vehicle for providing access to postsecondary education for low- and moderate-income families. This shift made it inevitable that policy makers would track student default rates on loans as one indicator of the efficacy of student loan programs. Leading up to the 1986 HEA reauthorization, policy makers had intense discussions about student loan default and both institutional and federal loan practices, and in 1989 Congress first passed legislation imposing penalties on institutions with high default rates. Then, the reauthorization of 1992 broadened eligibility for subsidized loans, increased loan limits, and opened the unsubsidized loan program to all students. Concerns about student loan default, however, remained and a possible link between default and the quality of higher education institutions was discussed during the 1998 reauthorization process. Some community colleges and Historically Black Colleges and Universities, proprietary institutions, and urban four-year colleges and universities had high student loan default rates. That year, Congress altered the cohort default rate calculation by extending—from 180 to 270 days—the amount of time before the federal government deems a delinquent borrower to be in default. The changes in student loan default policies in the 1998 HEA reauthorization are widely regarded as having affected the financial aid practices of many nonprofit and for-profit postsecondary institutions