ERIC Number: ED457804
Record Type: Non-Journal
Publication Date: 2001-Nov
Reference Count: N/A
Student Loan Forbearance and Its Relationship to Default. Synopsis: Higher Education Research Highlights.
Price, Derek V.
As the number and volume of student loans increase nationally, lenders and policymakers look more closely at the use of loan forbearance. This paper examines whether forbearance really cuts the risk of loan default by reporting on a study of more than 9,800 Stafford loans in forbearance in December 1996. That research shows that the default rate for loans in forbearance was similar to the overall loan default rate for the Federal Family Education Loam Program. The length of time in forbearance reduced the risk of borrower default. Forbearance may have saved 4% in potential loan default costs by enabling some borrowers to repay their loans in full. Borrowers who defaulted were likely to have attended less than four-year institutions. Among loan defaults, forbearance reduced the loss to taxpayers by at least 4%. Forbearance, however, substantially increased repayment costs for borrowers who capitalized interest. (SLD)
Publication Type: Reports - Research
Education Level: N/A
Authoring Institution: Lumina Foundation for Education, Indianapolis, IN.
Identifiers - Laws, Policies, & Programs: Stafford Student Loan Program