Factors Affecting the Probability of Default: Student Loans in California

Much of the recent research on the causes of student loan default has focused on the characteristics of borrowers and the schools they attended. Little attention has been given to post-college experiences as a determinant of default. By linking a large database of California student borrowers with background financial and demographic information and post-college employment data, this study examines factors that predict default for borrowers in the Federal Family Education Loan program, including post-college variables. Background demographic and financial characteristics, leaving school without a degree, having low wages after leaving school, or experiencing unemployment were major determinants of default. Also, controlling for these socioeconomic variables, the analysis revealed that vocational schools, especially privately held ones, are more likely to have students who default on their loans