Panel Paper: Student Loan Discrimination: Measurement and Evidence

Saturday, November 10, 2012 : 10:55 AM
International B (Sheraton Baltimore City Center Hotel)

*Names in bold indicate Presenter

Rajeev Darolia, University of Missouri

Though discrimination in credit markets has long been a focus for policymakers and researchers, very little is known about discrimination in student loan markets. Equal access to student loans is crucial to ensure that racial and ethnic minorities do not face increased barriers to attending postsecondary education. Discrimination in student loan markets may result in minority students having less opportunity to build assets, accumulate wealth, and enjoy relatively high incomes. Distinct characteristics of the educational loan market, lack of collateral, lack of borrower credit history, and difficulty predicting repayment probability, make measuring discrimination in student loan markets even more difficult. In this essay, I describe where students may face discrimination in educational loan markets and discuss available evidence of such practices. Using a number of different data sources, I provide some evidence of potential discrimination. I present a number of models that are used in the discrimination literature to statistically test for potential discrimination and discuss associated challenges.