Background Characteristics of Borrowers

Background characteristics are those the student brings with him or her to college which an institution has little or no ability to affect, such as age, gender, ethnicity, parents’ education and income, high school curriculum and achievement, borrower aptitude and attitude. The latter – attitude – refers to the borrower’s attitude toward a variety of things which could affect his or her propensity to default, including loans, debt, and other financial responsibilities (Volkwein and Szelest 1995).
Woo found that being female decreased a borrower’s chance of default by 36 percent (Woo 2002).
A study of Missouri borrowers also found that men are more likely to default than women (Podgursky et al. 2002).
A third study, this one national, found that being male increases default probability by 5.8 percent (Flint 1997).
However, Volkwein and Szelest found no significant difference in default rates between males and females (Volkwein and Szelest 1995).
A mid-1980s study of Pennsylvania borrowers found no link between gender and default (Knapp and Seaks 1992).
Older students are more likely to default than younger students, perhaps due to a weakening of ties to parents and family who might assist a student experiencing financial difficulties (Woo 2002).
The Missouri study also found that older students are more likely to default than younger students (Podgursky et al. 2002).
Each year beyond the age of 21 increases default probability by 3 percent (Flint 1997).
Background variables associated with lower default rates include being Asian American or White, having a college-educated parent, and coming from a family with an income over $30,000. Variables associated with higher default rates are being African American or American Indian, coming from a family of little formal education, and having a GED or no high school diploma (Volkwein et al. 1998).
Another study also found that being African American increases default probability by 11.7 percent (Flint 1997).
However, Volkwein et al. find that borrowers in every ethnic group who have similar earned degrees, marital status, and family size exhibit almost identical records of earned income and loan repayment. Thus, the borrower’s socioeconomic status, type of institution attended, grades earned, and choice of major appear to be less important than whether he or she completed a degree, is married or single, and has dependent children. African Americans and Hispanics have lower levels of degree attainment, lower levels of academic achievement, almost twice the number of children, and twice the rate of separation and divorce, than Whites. These circumstances, rather than ethnicity, appear to explain the differences in default rates (Volkwein et al. 1998).
African American and Hispanic defaulters are significantly more likely to be unemployed, to be dissatisfied with their educational programs, and to have personal problems that interfere with repayment (Volkwein and Cabrera 1998).
Across all ethnic groups, borrowers owe about one-half of their original loan amounts four years after graduating (Lochner and Monge-Naranjo 2003).
The variables that reduce default are substantially the same across ethnic populations, but their influence on non-Whites is larger than it is on Whites: among all populations, being female and being married lower the default rate, and do so more dramatically for non-Whites than for Whites (Volkwein et al. 1998).

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