In a new study released by the Brookings Institution, it appears the student debt picture is even worse than previously thought, a “development” that seems all to familiar and a bit repetitive.
The study analyzed at student loan information from the Department of Education, released in October 2017. The author, Judith Scott-Clayton, hoped to provide “a broader perspective on student debt and default” using a sample including both borrowers and non-borrowing college entrants.
The study focused on the outcomes of two distinct groups of college attendees starting school in 1995 and 2003. Highlights from the study included stark differences in default rates between black and white students along with a large discrepancy in default rates between attending state and for-profit schools.
Out of 100 students from 1995 at for-profit schools, an average of 23 defaulted within twelve years. The number jumped to 43 out of 100 students for the 2003 group. The author of the study notes that the fervor around college accountability ought to focus on for-profit colleges, as they often produce the worst education outcomes for their students. According to Brookings, the results “provide support for robust efforts to regulate the for-profit sector.”
Amid worrying trends in the affordability of college and the inability for entrants to repay their loans, the Brookings report is timely. Cumulative default rates continue to rise, and the authors predict default rates could rise to 40 percent by 2023. While use of college loans to pay for school come with inherent risks, students at for-profit institutions seems to have much poorer financial outcomes than their counterparts in state-subsidized schools.
One of the startling findings from the study was the difference between white students and black students at for-profit schools. On average, only 4 percent of white students defaulted within 12 years of entering school. Conversely, over two-thirds of black students at for-profit colleges found themselves in default over the same period. The study noted that black graduates from Bachelor programs default five times more often than similar BA graduates who are white. Notably, black students are more likely to drop out, a factor in repayment success.
The Brookings study makes stark predictions about the future of student debt in America while hinting at the need for reform. Brookings suggests efforts to regulate for-profit schools, decrease the dropout rate, and promote income-contingent repayment in order to help students with affordability and repayment success after graduation.