Grit and Credit Risk

59 Pages Posted: 12 Dec 2018 Last revised: 16 Oct 2019

See all articles by Jess Cornaggia

Jess Cornaggia

Pennsylvania State University - Department of Finance

Kimberly Rodgers Cornaggia

Pennsylvania State University - Department of Finance

Han Xia

University of Texas at Dallas - Naveen Jindal School of Management

Date Written: October 16, 2019

Abstract

We analyze how grit affects loan default. With a license to use individually identifiable information, we find that students who withdraw from college courses – an early indicator of low grit – are 13.2% more likely to default on student loans than those exhibiting perseverance. This effect is especially strong when students withdraw from courses in their chosen major and courses at more selective institutions. As an alternative proxy for grit, we find students who retake courses after performing poorly are 17.1% less likely to default on their loans than those who do not retake the courses.

Keywords: Student loans, Grit, Perseverance, Credit risk factors, Household finance

JEL Classification: D14, H52, H81, I22, I28

Suggested Citation

Cornaggia, Jess and Cornaggia, Kimberly Rodgers and Xia, Han, Grit and Credit Risk (October 16, 2019). Available at SSRN: https://ssrn.com/abstract=3287952 or http://dx.doi.org/10.2139/ssrn.3287952

Jess Cornaggia

Pennsylvania State University - Department of Finance ( email )

University Park, PA 16802
United States

HOME PAGE: http://jesscornaggia.com

Kimberly Rodgers Cornaggia (Contact Author)

Pennsylvania State University - Department of Finance ( email )

306 Business Bldg
University Park, PA 16802
United States
814-865-2243 (Phone)
814-865-3362 (Fax)

HOME PAGE: http://directory.smeal.psu.edu/kjr15

Han Xia

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

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