Grit and Credit Risk
59 Pages Posted: 12 Dec 2018 Last revised: 16 Oct 2019
Date Written: October 16, 2019
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: Suggested Citation