The National Center for Education Statistics recently released new statistics on the repayment progress of student loan borrowers who entered college in 2003. This is the first time the agency has examined the outcomes of student loan borrowers over a long period of time. Typically, the Department doesn’t collect data on the race of borrowers, but the results of these statistics were broken down by race and ethnicity.
Overall, the results showed that as of 2015, 60 percent of all students still have to take out student loans to attend college in general. This figure drops to 48 percent for public, two-year colleges, but it jumps to 89 percent for private, for-profit colleges.
The statistics also looked at the progress students had made toward paying back their loans 12 years later, starting in 2003. There was a significant difference between races. As of 2015, white student borrowers owed 65 percent of their original loan balance. Latino student borrowers owed 83 percent of their original loan balance, and African American borrowers owed 113 percent of their original loan balance.
The data also showed that students are starting to perform worse on their student loan repayments over time. Borrowers who started college during the 95-96 school year owed 68 percent of their original loan amount 12 years later in 2007. In comparison, students who started in the 03-04 school year owed 80 percent of their original loan amount 12 years later.
Furthermore, earning a Bachelor’s degree does not entirely protect borrowers. Overall, students who earned a Bachelor’s degree still owed 60 percent of their original loan amount.
Those without degrees fared worse. It was confirmed that dropping out still continues to be the most significant impact on a borrower’s ability to repay their loans. 46 percent of students who dropped out of any type of college defaulted on their loans sometime within that 12-year period. And 62 percent of students who dropped out of for-profit colleges defaulted as opposed to the 44 percent of students that attended public four-year colleges.
What’s the Big Deal?
With students leaving college struggle to repay their loans at an increasing rate, the data paints an interesting portrait of the student loan program, the colleges themselves, student loan borrowers, and their ability to manage debt repayment. It could indicate the need for greater accountability across the board.
The Federal government, the source of funding and policy, may need to reevaluate its lending practices and student loan program as a whole, including school eligibility for funding, student loan servicing, and repayment programs.
Additionally, the fact that nearly half of all borrowers who dropped out of school defaulted on their loans shows that many students enter college without a clear plan for their education and subsequent career. A distinct indicator of this is school choice.
Attending for-profit schools continue to be the biggest hurdle for most students looking to obtain a degree and repay their loans. For borrowers who drop out of college, their likelihood of defaulting on their loans increases by 12 percent if they attended a for-profit college as opposed to a public four-year school.
This data hints that future students should carefully consider their choice of college, the cost of college, and how they plan to repay their loans after graduation since it has a significant impact on their student debt repayment outcome.
While attending college is important, hindsight may provide enough clarity to infer that attending college without a clear idea of program quality is a big factor in student loan repayment trends.
With that being said, this could present an opportunity for colleges to do a better job at preparing students for their lives after graduation, and it also might indicate that colleges need to outline more transparent expectations for their students (something that the government has looked into).
Overall, the picture is not good for current students or anyone who plans on attending a higher education institution. Currently, student loan debt numbers $1.4 trillion (not even counting private loan debt) across over 44 million borrowers. Judging by the trends from this data, the numbers may only be getting worse.
Author: Andrew Rombach
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