In a study of California borrowers, failure to complete the academic program was one of the strongest predictors of default among all types of students (Woo 2002).
In a study of Texas A&M University students, borrowers who did not graduate had a nearly 14 percent default rate while borrowers who did graduate had less than a 2 percent default rate. The study further indicates that borrowers who obtain degrees have low default rates no matter what type of degree (Bachelor of Science, Bachelor of Arts, etc.) they get (Steiner and Teszler 2003).
Although college GPA is also a predictor of loan default and repayment behavior, a national study of borrowers who began higher education between 1973 and 1985 found that degree completion is more important than grades earned. Earned degree also outweighs the influence of institution type, especially among African Americans (Volkwein et al. 1998).

A mid-1980s study of borrowers at Pennsylvania colleges and universities also found that the single variable with the greatest statistical significance in default rates was graduation (Knapp and Seaks 1992).
For both Whites and African Americans, degree completion has a dramatic impact on lowering the rate of default, but the impact of each credential through bachelor’s degree attainment is two to three times more important for African American borrowers than for Whites in lowering default rates. Researchers in this national study found that, for African Americans, completing a license/certificate or associate’s degree lowered their default rate by about 18 percent, while completing a bachelor’s degree lowered the probability of default by 14 percent. (Volkwein et al. 1998).
A study of University of Texas at Austin borrowers found that the highest degree attained accounted for 27 percent of the variation in default behavior in the study, the most of any variable in the study. The variable with the second greatest impact on defaults – number of credit hours failed – accounted for 21 percent of the variation in default behavior (Thein and Herr 2001).
Poor academic performance is the number one reason for student departure, and departure before degree completion is the number one reason for loan default (Volkwein and Cabrera 1998).
To the extent that graduation opens employment opportunities and raises earnings, successful retention programs will lower an institution’s default rates (i.e. graduation “causes” success). However, it is also plausible that the tenacity
that causes some students to complete a degree may also be operating to reduce their default rates, such that graduation is more of an effect than a cause and will respond less to retention programs (Knapp and Seaks 1992).

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