IDEAS home Printed from https://ideas.repec.org/p/fip/fedgfe/2015-98.html
   My bibliography  Save this paper

A Trillion Dollar Question: What Predicts Student Loan Delinquencies?

Author

Abstract

The recent significant increase in student loan delinquencies has generated interest in understanding the key factors predicting the non-performance of these loans. However, despite the large size of the student loan market, existing analyses have been limited by data. This paper studies predictors of student loan delinquencies using a nationally representative panel dataset that anonymously combines individual credit bureau records with Pell Grant and Federal student loan recipient information, records on college enrollment, graduation and major, and school characteristics. We show that borrower-level credit characteristics are important predictors of student loan delinquencies. In particular, credit scores of young borrowers are highly predictive of future student loan delinquencies, even when measured well before borrowers enter repayment. In marked contrast, our results point to only a limited power of student debt levels in predicting future student loan credit events. Our findings have potentially useful practical implications. For example, access to credit file information when borrowers exit school could help to more effectively target student loan borrowers who might benefit from enrolling in income-driven repayment or loan modification plans.

Suggested Citation

  • Alvaro Mezza & Kamila Sommer, 2015. "A Trillion Dollar Question: What Predicts Student Loan Delinquencies?," Finance and Economics Discussion Series 2015-98, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2015-98
    DOI: 10.17016/FEDS.2015.098
    as

    Download full text from publisher

    File URL: http://www.federalreserve.gov/econresdata/feds/2015/files/2015098pap.pdf
    File Function: Full text
    Download Restriction: no
    File URL: http://dx.doi.org/10.17016/FEDS.2015.098
    Download Restriction: no
    File URL: https://libkey.io/10.17016/FEDS.2015.098?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Susan M. Dynarski & Steven W. Hemelt & Joshua M. Hyman, 2013. "The Missing Manual: Using National Student Clearinghouse Data to Track Postsecondary Outcomes," NBER Working Papers 19552, National Bureau of Economic Research, Inc.
    2. Adam Looney & Constantine Yannelis, 2015. "A Crisis in Student Loans? How Changes in the Characteristics of Borrowers and in the Institutions They Attended Contributed to Rising Loan Defaults," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 46(2 (Fall)), pages 1-89.
    3. Jesse Bricker & Jeffrey P. Thompson, 2014. "Does education loan debt influence household financial distress? An assessment using the 2007-09 SCF Panel," Finance and Economics Discussion Series 2014-90, Board of Governors of the Federal Reserve System (U.S.).
    4. Thomas Hylands, 2014. "Student Loan Trends in the Third Federal Reserve District," Cascade Focus, Federal Reserve Bank of Philadelphia, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ege Aksu & Sidhya Balakrishnan & Eric Bettinger & Jonathan S. Hartley & Michael S. Kofoed & Dubravka Ritter & Douglas A. Webber, 2024. "Navigating Higher Education Insurance: An Experimental Study on Demand and Adverse Selection"," Working Papers 24-07, Federal Reserve Bank of Philadelphia.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Alvaro Mezza & Daniel R. Ringo & Shane M. Sherlund & Kamila Sommer, 2016. "Student Loans and Homeownership," Finance and Economics Discussion Series 2016-10, Board of Governors of the Federal Reserve System (U.S.).
    2. Jinhee Kim & Swarn Chatterjee, 2019. "Student Loans, Health, and Life Satisfaction of US Households: Evidence from a Panel Study," Journal of Family and Economic Issues, Springer, vol. 40(1), pages 36-50, March.
    3. Castleman, Benjamin L. & Owen, Laura & Page, Lindsay C., 2016. "Reprint of “Stay late or start early? Experimental evidence on the benefits of college matriculation support from high schools versus colleges”," Economics of Education Review, Elsevier, vol. 51(C), pages 113-124.
    4. Gustavo Pereira Serra, 2024. "(Trying to) Catch Up with the Higher-Skilled Joneses: Student loans in a segmented educational market from a Post-Keynesian perspective," Working Papers 2412, New School for Social Research, Department of Economics.
    5. Manuel S. González Canché, 2017. "Financial Benefits of Rapid Student Loan Repayment: An Analytic Framework Employing Two Decades of Data," The ANNALS of the American Academy of Political and Social Science, , vol. 671(1), pages 154-182, May.
    6. Mueller, Holger M. & Yannelis, Constantine, 2019. "The rise in student loan defaults," Journal of Financial Economics, Elsevier, vol. 131(1), pages 1-19.
    7. Joshua Goodman & Michael Hurwitz & Jonathan Smith, "undated". "Access to Four-Year Public Colleges and Degree Completion," Working Paper 175226, Harvard University OpenScholar.
    8. Cox, James C. & Kreisman, Daniel & Dynarski, Susan, 2020. "Designed to fail: Effects of the default option and information complexity on student loan repayment," Journal of Public Economics, Elsevier, vol. 192(C).
    9. Rajashri Chakrabarti & Vyacheslav Fos & Andres Liberman & Constantine Yannelis & Tarun Ramadorai, 2023. "Tuition, Debt, and Human Capital," The Review of Financial Studies, Society for Financial Studies, vol. 36(4), pages 1667-1702.
    10. Jeffrey T. Denning & Todd R. Jones, 2021. "Maxed Out?: The Effect of Larger Student Loan Limits on Borrowing and Education Outcomes," Journal of Human Resources, University of Wisconsin Press, vol. 56(4), pages 1113-1140.
    11. Stoddard, Christiana & Urban, Carly & Schmeiser, Maximilian, 2017. "Can targeted information affect academic performance and borrowing behavior for college students? Evidence from administrative data," Economics of Education Review, Elsevier, vol. 56(C), pages 95-109.
    12. Wenhua Di & Yichen Su, 2021. "Conspicuous Consumption: Vehicle Purchases by Non-Prime Consumers," Working Papers 2107, Federal Reserve Bank of Dallas.
    13. Looney, Adam & Yannelis, Constantine, 2022. "The consequences of student loan credit expansions: Evidence from three decades of default cycles," Journal of Financial Economics, Elsevier, vol. 143(2), pages 771-793.
    14. Azmat Ghazala & Simion Ştefania, 2021. "Charging for Higher Education: Estimating the Impact on Inequality and Student Outcomes," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 21(1), pages 175-239, January.
    15. Holger M. Mueller & Constantine Yannelis, 2017. "Students in Distress: Labor Market Shocks, Student Loan Default, and Federal Insurance Programs," NBER Working Papers 23284, National Bureau of Economic Research, Inc.
    16. Natalie Cox, 2017. "Pricing, Selection, and Welfare in the Student Loan Market: Evidence from Borrower Repayment Decisions," Working Papers 2017-2, Princeton University. Economics Department..
    17. Armona, Luis & Chakrabarti, Rajashri & Lovenheim, Michael F., 2022. "Student debt and default: The role of for-profit colleges," Journal of Financial Economics, Elsevier, vol. 144(1), pages 67-92.
    18. Jonathan Smith & Kevin Stange, 2016. "A New Measure of College Quality to Study the Effects of College Sector and Peers on Degree Attainment," Education Finance and Policy, MIT Press, vol. 11(4), pages 369-403, Fall.
    19. Seth Gershenson & Cassandra M. D. Hart & Joshua Hyman & Constance A. Lindsay & Nicholas W. Papageorge, 2022. "The Long-Run Impacts of Same-Race Teachers," American Economic Journal: Economic Policy, American Economic Association, vol. 14(4), pages 300-342, November.
    20. Barr, Nicholas & Chapman, Bruce & Dearden, Lorraine & Dynarski, Susan, 2019. "The US college loans system: Lessons from Australia and England," Economics of Education Review, Elsevier, vol. 71(C), pages 32-48.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedgfe:2015-98. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ryan Wolfslayer ; Keisha Fournillier (email available below). General contact details of provider: https://edirc.repec.org/data/frbgvus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.