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Guess Who’s Most Likely to Default on Their Student Loans?

Student loan default rates have doubled over the last decade, and new research from Adam Looney of the U.S. Treasury Department and Constantine Yannelis from Stanford University, shows most of the increase is associated with the number of non-traditional borrowers attending for-profit schools and two-year colleges.

According to Looney and Yannelis’ research, based on analysis of U.S. Department of Education federal student loan borrowing data, by 2011 borrowers at for-profit and two-year colleges represented almost 50 percent of those leaving school and starting to repay their loans, and 70 percent of student loan defaults.

Their research, “A Crisis in Student Loans? How Changes in the Characteristics of Borrowers and the Institutions they Attended Contributed to Rising Loan Defaults,” published in Brookings Papers on Economic Activity, examines the rise in student loan delinquency and default using a set of administrative data on federal student borrowing connected to earnings and tax (with identifying information removed) records.

“Between 2000 and 2014, the total volume of outstanding federal student debt nearly quadrupled to surpass $1.1 trillion, the number of student loan borrowers more than doubled to 42 million, and default rates among recent student loan borrowers rose to their highest levels in 20 years,”

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