UMCP Study on
Defaults
A Study of Ten Year Default Rates of
Undergraduate Students Who Borrowed
Any Loan in 1999
UMD Office of Student Financial Aid
11/6/2012
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Purpose and Scope
The purpose of this study is to determine the indices
that cause students to default on their student loans.
• Describe the academic performance,
demographics, and financial characteristics of
students who defaulted.
• Identify which characteristics are associated with
the highest default rates.
• Examine the correlation of graduation with each
characteristic.
UMD Office of Student Financial Aid
11/6/2012
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Method
• Cohort analysis: All undergraduate students who
were enrolled in Fall 1999 and who took out any
loan in aid year 1999 (N=9,865).
• This cohort was matched to a report of all students
from the University of Maryland who defaulted on
their loan(s) from 2000 to 2010.
UMD Office of Student Financial Aid
11/6/2012
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Historical Default Rate
•
•
UMCP’s default rate is consistently lower than the national average.
The UMCP default rate ranges from 1.2% in FY 2005 to 3.9% in FY 2008.
The average rate is 2.3%.
UMD Office of Student Financial Aid
11/6/2012
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Ten Year Default Rate
A total of 404 (4% of 9,865)
undergraduates who borrowed any loan
in 1999 defaulted between 2000 and 2010.
UMD Office of Student Financial Aid
11/6/2012
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Default Rate by Graduation
• Students that do not graduate have default rates
more than three times higher than those that do
graduate.
UMD Office of Student Financial Aid
11/6/2012
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Default Rate by Terms Enrolled
• While students who graduated were less likely to default
regardless of the number of terms enrolled, students enrolled
in more than 12 terms but did not graduate were four times
more likely to default than those that did graduate.
UMD Office of Student Financial Aid
11/6/2012
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Default Rate by Transfer Status
• One-third of the students in the cohort initially enrolled as
transfer students. Transfer students were at a slightly higher risk
of defaulting (4.7% default rate) when compared to nontransfer students (3.8% default rate).
• Among those who did not graduate, transfer students had a
slightly lower default rate.
UMD Office of Student Financial Aid
11/6/2012
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Default Rate by High School GPA
• Students with low high school GPAs were much more likely to
default regardless of whether they completed their
undergraduate degree. Almost one in five students with low
high school GPAs who did not graduate from college
defaulted on their loans.
UMD Office of Student Financial Aid
11/6/2012
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Default Rate by UG GPA
*
• Students with higher cumulative undergraduate GPAs were
less likely to default.
• Those with a high GPA (3.4-4.0) who did not graduate had
default rates similar to the general default rate of students
who graduate.
*UG GPA is the cumulative GPA as of the last term enrolled as an undergraduate.
UMD Office of Student Financial Aid
11/6/2012
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Default Rate by Gender
• While females make up 51% of the cohort, only 42%
of defaulters are female.
• Males have a slightly higher default rate, among all
students as well as those who did not graduate.
UMD Office of Student Financial Aid
11/6/2012
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Default Rate by Race/Ethnicity
•
•
•
While over half (55%) of the students in the cohort are white, just 31% of the
defaulters are White. Black/African American students make up 22% of the
cohort but 51% of defaulters.
Black/African American students are more than four times more likely than
White students to default.
Among students who do not graduate, Black/African American students are
more than twice as likely as White students to default.
UMD Office of Student Financial Aid
11/6/2012
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Default Rate by Age
• A majority (68%) of undergraduate students in the cohort were
between 19 years to 22 years old in Fall 1999. Older students
were in general more likely to default, but the age differences
in default rates were less pronounced among only students
who did not graduate.
UMD Office of Student Financial Aid
11/6/2012
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Default Rate by Marital Status
•
•
•
Nearly all students (96%) in the cohort were unmarried in Fall 1999.
A higher percentage of married students defaulted, but among
students who did not graduate there was a negligible difference in
default rates by marital status.
The default rate increases with failure to graduate most among
unmarried students.
UMD Office of Student Financial Aid
11/6/2012
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Default Rate by Residency Status
• In state and out of state students have the very
similar default rates, but if they do not graduate, out
of state students are more likely to default than
instate students.
UMD Office of Student Financial Aid
11/6/2012
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Default Rate by School of Major
•
Students in
Undergraduate Studies
had the highest risk of
defaulting (12% default
rate), regardless of
graduation.
•
While students in the
Business, Education and
Journalism schools are at
the least risk of
defaulting, students in
these schools who do
not graduate have
default rates similar to (if
not higher than) those
not graduating from
other schools.
UMD Office of Student Financial Aid
11/6/2012
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Default Rate by Dependency
• 18% of the cohort filed FAFSAs as independents in 1999, and
had default rates 2.3 times higher than dependent students.
• The default rate among depended students increases by a
bigger factor with failure to graduate than it does among
independent students.
UMD Office of Student Financial Aid
11/6/2012
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Default Rate by Total Loan Amount
•
•
•
In general, students taking very high cumulative loan amounts were more
likely to default.
The biggest jump in default rate happens once students take more than
$20,000.
Students taking more than $20,000 in loans who do not graduate are five
times more likely to default than those who do graduate (20% compared to
4%, not shown below).
UMD Office of Student Financial Aid
11/6/2012
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Default Rate by Alternative Loan
•
•
The 8% of students in the cohort who took any alternative loan from
1999 to 2009 were more twice as likely to default.
Among those who took an alternative loan, students who did not
graduate were six times more likely to default than those who did
graduate (18% compared to 3%, not shown below).
UMD Office of Student Financial Aid
11/6/2012
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Default Rate by Average Unmet Need
• Default rates increase with higher amounts of unmet need,
but once unmet need exceeds $10,500, default rates begin to
decline.
• For all levels of unmet need, students who did not graduate
had higher default rates than those that did graduate.
UMD Office of Student Financial Aid
11/6/2012
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Default Rate by Average EFC
• On average, the yearly EFC of students who
defaulted was $3,843 less than those who did not
default ($9,421.52 compared to $5,578.16) (not
shown below)
UMD Office of Student Financial Aid
11/6/2012
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Summary of Loan Takers at
Risk of Defaulting
Default Rate
Graduated
Didn’t Graduate
Total
Any Academic Probation
8%
19%
14% (20)
Undergraduate Studies Major
6%
22%
12% (21)
High School GPA > 1.4 < 2.3
9%
19%
12% (15)
Last Cum UG GPA >1.4 < 2.3
7%
13%
10% (178)
Black/Af. American
7%
17%
9% (207)
30+ Years Old
6%
12%
8% (36)
Any Alternative Loan
3%
18%
7% (49)
Unmet Need > $7,000 < $10,500
5%
14%
7% (85)
Average EFC <=$2,500
5%
14%
7% (225)
Independent
5%
12%
7% (129)
Enrolled 13+ Terms
4%
20%
6% (112)
Cumulative Loan Amount > $20,000
4%
20%
6% (81)
Total
3%
10%
4% (404)
UMD Office of Student Financial Aid
11/6/2012
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Conclusion:
Default Rates and Graduation
• Academic performance measures are the most
powerful indicator of potential to default if
graduation is not considered.
• Failure to graduate has the biggest effect on
default rates among students who took any
alternative loan, students who have total loan
amounts greater than $20,000, and students who
were enrolled for more than 13 terms.
• Graduation seems to mediate other risk factors for
defaulting.
UMD Office of Student Financial Aid
11/6/2012
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Questions?
Sarah Bauder
Assistant Vice President
Financial Aid and Enrollment Services
sbauder@umd.edu
301-314-8279
UMD Office of Student Financial Aid
11/6/2012
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