A crisis in student loans? How changes in the characteristics of borrowers and in the institutions they attended contributed to rising loan defaults

By Adam Looney, U.S. Treasury Department and  Constantine Yannelis, Stanford University - brookings.edu

This paper examines the rise in student loan delinquency and default drawing on a unique set of administrative data on federal student borrowing, matched to earnings records from de-identified tax records. Most of the increase in default is associated with the rise in the number of borrowers at for-profit schools and, to a lesser extent, 2-year institutions and certain other non-selective institutions, whose students historically composed only a small share of borrowers. These non-traditional borrowers were drawn from lower income families, attended institutions with relatively weak educational outcomes, and experienced poor labor market outcomes after leaving school. 

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