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Default prevention: institutional practices at two-year colleges
The purpose of this study was to research default prevention strategies colleges can utilize to reverse student loan default among two-year colleges. Specifically, this study sought to identify what current actions financial aid departments are taking toward student loan default prevention. Controlling for different variables guided by theory and research, this study sought to identify any outlier colleges with lower default rates than would be otherwise predicted by their population and/or institutional characteristics. A mixed methods approach was utilized to collect the data for the study; U.S. Department of Education databases allowed the researcher to gather cohort default rates and other institutional characteristics of two-year colleges for analysis. The researcher used the institutional data for regression analysis to determine the predictive relationship between multiple institutional characteristics of two-year colleges and student loan default. The analysis examined and controlled for the following variables: retention rate, student to faculty ratio, percentage of students receiving Pell grants, and total amount of federal student loans received by institution and percent non-white by institution. The researcher also administered a financial aid administrator survey, which included questions pertaining to the financial aid department structure, practices and default prevention. Finally, interviews with financial aid administrators were conducted to identify what actions have been taken toward student loan default prevention. Resulting from an analysis of the data, two-year colleges were identified as beating the odds by having lower default rates than would otherwise be predicted and institutional default prevention strategies were characterized to reduce student loan default. These results indicate default prevention has a significant impact on lowering student loan default. The findings suggest more knowledge in the field of default prevention is needed to develop effective default prevention strategies. From the findings, it is suggested that further research look into current financial aid practices and the impact of default prevention as a preventative approach to reduce student loan default.