Defaulting on student loans: more than race as a predictor

Thesis (M.A., Economics)--California State University, Sacramento, 2014.Investing in higher education via federal financial aid programs has been an avenue for the U.S. government to generate potential economic growth as well as reduce income inequality. While federal financial aid programs have been shown to increase access to and persistence in higher education, especially for minorities, the growth in student loan debt and delinquency rates has become a concern. As prior literature and risk of default measures tend to focus on black as a main ethnicity in explaining default outcomes, this research is able to show there is more than race involved. Using logit models and the Baccalaureate & Beyond:1993-03 panel data, this research includes additional demographic, employment, educational, financial aid, and household capital and asset variables to estimate a significantly smaller effect of black borrowers on the probability of defaulting. Further, graduates of Private-for-profit institutions versus graduates of Public institutions have a significantly higher probability of defaulting.Economic