Abstract
Since its inception as part of the Higher Education Act of 1965, the Guaranteed Student Loan (GSL) program has become perhaps the leading federal initiative in helping to equalize educational and occupational opportunities. However, the GSL program has come under heavy criticism in recent years. High default rates, fueled by an all-time high loan volume, have generated public demands for increased accountability. In response, policymakers have cracked down on defaulters and their schools to protect a highly popular student aid program. However, little empirical evidence exists as to the correlates of student default rates, making the development of financial aid policy difficult in such stormy political conditions. This study, the first of its kind, examines default behavior among a large sample of students attending California proprietary schools and community colleges in 1982–83. It assesses the relative impact of student and institutional characteristics, and administrative practices thought to help curb loan defaults. Results indicate that, within the limits of the data, default rates stem chiefly from students' background characteristics, rather than characteristics or administrative practices of the institutions they attend. The paper concludes with a discussion of these findings and recommendations for policy and further research.
Get full access to this article
View all access options for this article.