School-type Variables

Borrowers who attend doctoral-granting institutions tend to have lower default rates and borrowers who attend proprietary (i.e. for-profit) institutions tend to have higher default rates. Nevertheless, although student loan policy and national legislation is based substantially on the belief that colleges and universities exert considerable influence on the actions of their students, Volkwein et al. (1998)
found little evidence of this. Default rate differences by school type are based more upon the nature of the borrowers and their achievements than on the nature of the institutions they attend. The authors suggest that different institutions simply attract different types of students (Volkwein, et al. 1998).
Woo also found that the fact that students in short-term (proprietary or two-year) programs have a higher default rate than students in long-term (four-year) programs appears to be a function of the types of students who enroll in the programs rather than some factor associated with the programs or schools themselves (Woo 2002).
Despite earlier studies to the contrary, there is little evidence that institutional characteristics have an impact on default. Rather, loan repayment and default behavior can mostly be predicted by the characteristics of individual borrowers, including choice of major, performance in college, and subsequent postcollege achievement and behavior. Staying in college, earning good grades, completing a degree, getting and staying married, and not having dependent children are all actions that lower the likelihood of default (Volkwein and Szelest 1995).
The student body size of an institution does not appear to play a role in default. If monitoring of students and close personal contact reduced default, then smaller school size and lower default rates would go together, but researchers find the relationship to be inverse and not significant (Knapp and Seaks 1992).

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