Background variables associated with lower default rates include being Asian American or White, having a college-educated parent, and coming from a family with income over $30,000. Variables associated with higher default rates are being African American or American Indian, coming from a family of little education, and having a GED or no high school diploma (Volkwein et al. 1998).
Parents’ income has an impact on default: an increase of one thousand dollars in income lowers the default risk by two-tenths of a percent; a ten thousand dollar increase lowers the probability by two percentage points (Knapp and Seaks 1992).
Most borrowers, even from poor families, do not default on student loans (Woo 2002).
The presence of both parents lowers the probability of default by about 2.7 percentage points, while the absence of a father increases the probability of default by 2.5 percentage points (Knapp and Seaks 1992).
Family Background and Income
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