Student Loans and Repayment Rates: The Role of For-profit Colleges

This paper examines the institutional determinants of federal loan status for a recent cohort of college students. We first
set out how institutions influence loan accumulations and repayment rates, with particular focus on for-profit colleges. We
then test a set of hypotheses about loan status and repayment using national data on loans, defaults, and repayments merged
with college-level data. For all measures of loan status there are significant raw gaps between for-profit colleges and public
and not-for-profit colleges. After controlling for student characteristics, measures of college quality, and college practices,
large gaps in loan balance per student remain: students in for-profit colleges, especially the 2-year colleges, borrow approximately
four times as much as they would have at a 2-year public college. For a student attending the ‘average’ college, their repayment
rate is predicted to be 5 [9] percentage points lower if that college is for-profit compared to public [non-profit]. Repayment
rates are also lower for colleges with higher proportions of minority students and with lower graduation rates; contrary to
some claims, single-program institutions appear to have higher repayment rates.