The 2016 National Financial Capability Study reveals information that helps hammer down the trouble demographic for student loan delinquency and default. What trouble demographic? Here is a hint. It is not a racial or size of debt demographic; it has to do with graduation status.
Basically, this data discovered that student loan delinquency and default was not as correlated with size of student loan debt as once previously thought. In fact, there is a stronger correlation between graduation and student loan delinquency and default. Today, about 30% of borrowers with student loan debt did not finish their education; in other words, this portion of borrowers did not have a degree.
Over 50% of borrowers without a degree claimed to be late on at least one payment; on the contrary, a comparative 40% of borrowers with a degree made the same claim. The possession of a degree seemed to have a larger impact on the ability to pay back a student loan regardless of size.
This claim is supported by another study run by the Federal Reserve Board of Governors. It showed that borrowers with smaller debts had greater trouble with payments. More specifically, 20% of borrowers with less than $10,000 are in debt. 17% of those with $10,000 to $25000 and 11% of those with over $100,000 struggled. This data does not specifically state that those without degrees struggle more, but the lower debt amount hints at an unfinished education, therefore less school.
Graduates with a degree and student debt have considerably more options to pay off their student loans. The first option is the ability to simply make consistent payments with a steady income because there is a better chance of landing a post graduation job. Another option that a grad with a degree is more likely to capitalize on is an income-driven repayment plan. This pretty much insures that their student loans are consistently paid. On top of all this, companies are beginning to offer benefits to their new employees with student debt. These are all options that stem entirely from completing school with a degree.
There are many reasons that contribute to the student loan debt crisis, and one of them is the graduation rate. It has been shown statistically that borrowers with a degree are significantly more successful in paying back student loans. For-profit colleges with their lower graduation rates certainly do not help the issue, and colleges with high acceptance rates may also be a contributor. At any rate, the current college-student loan combination is creating packs of drop-outs with more debt than they can handle.