Research News

UW’s Hillman examines how federal student aid is disbursed through colleges

April 13, 2015

UW-Madison’s Nicholas Hillman is the co-author of a paper that was published earlier this month in the Journal of Student Financial Aid.

The paper is titled, “Paying for Default: Change Over Time in the Share of Federal Financial Aid Sent to Institutions with High Student Loan Default Rates.”

Nicholas Hillman
Hillman is an assistant professor in the Department of Educational Leadership and Policy Analysis, and an affiliate of the Wisconsin Center for the Advancement of Postsecondary Education (WISCAPE)

The paper is co-authored by Ozan Jaquette of the University of Arizona.

The paper’s abstract notes: “Both federal spending on financial aid and student loan default rates have increased over the past decade. These trends have intensified policymakers’ concerns that some postsecondary institutions —  particularly in the for-profit sector — maximize revenue derived from federal financial aid without helping students to graduate or find employment.”

It continues: “Prior studies have analyzed federal financial aid disbursements and student loan default rates in isolation from one another. Therefore, little is known about how much federal aid flows through colleges with high student loan default rates. The present study examines change over time and across sectors in the share of federal financial aid disbursed to institutions with ‘low,’ ‘medium,’ and ‘high’ student loan default rates.”

Hillman and Jaquette report that they “found that the share of federal student aid flowing through colleges with medium and high student loan default rates increased substantially from 2007-08 to 2012-13, but declined in 2013-14 as the national job market improved. However, the reduction in federal financial aid disbursed to for-profit institutions with high student loan default rates occurred prior to the national job-market recovery, suggesting that federal regulations helped to divert federal financial aid from poor-performing institutions.”

But make sure and check out the entire article for free online.