Lower house prices lead to higher student loan default rates

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By Jillian Berman | MarketWatch

Add this to the list of potential consequences of the housing bust: Rising student loan defaults.

Drops in housing prices during the Great Recession account for between 24% and 32% of the rise in student loan defaults during the same period, according to a working paper distributed this week by the National Bureau of Economic Research, a nonprofit economic research organization. The study — which is based on administrative student loan data, de-identified tax data and zip code home price data for roughly 300,000 student loan borrowers in repayment during the recession — shows that borrowers living in zip codes where home prices fell more dramatically were more likely to default.

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