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Do for-profit universities induce bad student loans?

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  • Goodell, John W.

Abstract

Despite its great social and financial importance, little of the prior empirical research on student-loan default focuses on the role of for-profit universities. This study finds a positive association between student loan default and an institution's for-profit status—even when controlling for previously identified important factors, including graduation rates, the percentage of students who are low-income and from minority groups, and whether the institution is two- or four-year. Overall, my results are consistent with for-profit institutions systematically encouraging ill-advised loans. The results are economically significant, with default rates generally 5–6 percentage points higher for for-profit institutions.

Suggested Citation

  • Goodell, John W., 2016. "Do for-profit universities induce bad student loans?," The Quarterly Review of Economics and Finance, Elsevier, vol. 61(C), pages 173-184.
    • Handle: RePEc:eee:quaeco:v:61:y:2016:i:c:p:173-184
    DOI: 10.1016/j.qref.2016.02.003
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    Cited by:

    1. Goodell, John W. & Goyal, Abhinav & Hasan, Iftekhar, 2020. "Comparing financial transparency between for-profit and nonprofit suppliers of public goods: Evidence from microfinance," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 64(C).
    2. José Alberto Fuinhas & Victor Moutinho & Estefano Silva, 2019. "Delinquency and Default in USA Student Debt as a Proportional Response to Unemployment and Average Debt per Borrower," Economies, MDPI, vol. 7(4), pages 1-16, October.

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    More about this item

    Keywords

    Financial aid; Student loans; Access to finance; Default rates; Moral hazard;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • G2 - Financial Economics - - Financial Institutions and Services
    • I2 - Health, Education, and Welfare - - Education

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