Student Academic Performance, Dropout Decisions and Loan Defaults: Evidence from the Government College Loan Program
22 Pages Posted: 23 May 2016
Date Written: February 29, 2016
Abstract
This paper examines the effect of the government college loan program in Korea on student academic performance, dropout decisions and loan defaults. While fairness in educational opportunities has been guaranteed to some degree through this program, which started in 2009, there has been a great deal of controversy over its effectiveness. Empirical findings suggest that recipients of general student loan (GSL) lower academic performance than those who received income contingent loan (ICL). Moreover, for students attending private universities, a higher number of loans received increased the probability of a dropout decision, and students from middle-income households had a higher probability of being overdue than students from low-income households. These findings indicate that expanding the ICL program within the allowance of the government budget is necessary. Furthermore, providing opportunities for students to find various jobs and introducing a rating system for defaulters are two necessary tasks.
Keywords: Government College Loan Program, Student Academic Performance, Dropout Decision, Loan Default
JEL Classification: H52, I22, I23
Suggested Citation: Suggested Citation