Loan Servicing Factors

Learning of student loans from lenders is related to avoidance of default. Having multiple lenders tends to increase the default risk (Flint 1997).
Borrowers whose loans were held by more than one servicer were more likely to default, with each additional servicer increasing the chances of default by 18 percent. In addition, the number of loans – but not the amount borrowed – is related to default, with more loans signaling a higher risk. The number of servicers and loans may bear some relationship to the number of checks the borrower has to send monthly and perhaps to the ease with which his or her debts can be assessed and managed (Woo 2002).
Whereas having loans held by more than one servicer is positively associated with default, having one’s loan sold is negatively associated with the probability of default (Woo 2002).

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