Student loan borrowing in America: Metrics, demographics, and loan default aversion strategies

This study was designed to find more effective default aversion strategies for minimizing borrower defaults over the life of federal student loans. The study found over 5 million Americans in default and many more carrying very large student loan debt burdens contributing to the risk level of the federal student loan portfolio. This national social issue embodies an associated risk of individual borrowers becoming bankrupt or burdened with debt that affects their present and future quality of life.; Using data extracted from the National Student Loan Data System, quantitative analysis of Likert-Scale Survey responses from 153 student financial aid professionals on proposed changes to present metrics and methods, and responses from qualitative interviews with 12 notable scholar-experts concerning default aversion strategies, this study found agreement that metrics should be re-engineered to measure student defaults and dollars in default over a minimum of 4 years to loan lifetime as opposed to the present 2-year Cohort Default Rate (CDR) system. A sample of CDR experience over 8 years was found to be 2.44 times higher than the published 2-year CDR. Further, there is dissatisfaction with the present 25% default rate ceiling required for schools to maintain Federal Title IV financial aid eligibility under the Higher Education Act of 1965, as amended. Entire school groups exceeded the 25% default ceiling when viewed over 8 years. The study also found strong support for greater utilization of loan guaranty agencies in default aversion instead of debt collection.; The study concludes that economic and demographic changes taking place in higher education over the period 2001--2015 necessitate the higher education community increasing funding for outreach programs to educate low-income and minority at-risk populations on the availability of federal student loans, repayment options, and consequences of default. Other recommendations include re-engineering default management and school performance measures, forming a national task force focused on finding affordable higher education approaches for the at-risk groups, and initiating a study of expanded debt forgiveness for critical occupations such as teaching, health care, and civil protection.