-by Mark Huffman
“Student loan debt is about $1.2 trillion and growing, with not everyone who took out students loans able to pay them back.
Student loan default rates doubled between 2000 and 2011, according to Brookings Institution researchers who analyzed U.S. Department of Education administrative data on federal student borrowing, linked to earnings records derived from tax records.
Their report traces most student loan defaults to students who attended for-profit colleges and, to a lesser extent, community colleges. A common thread, the researchers found, was non-traditional students – typically older than the average student – and those attending “non-selective” institutions – schools that accept anyone – were most likely to default.
Weak educational outcomes
“These non-traditional borrowers were drawn from lower income families, attended institutions with relatively weak educational outcomes, and experienced poor labor market outcomes after leaving school,” the authors write.
At the same time, the authors contend students attending traditional public or private non-profit colleges were much less likely to default and have done better in the job market after graduation.
The finding that a significant portion of student loan defaults occurs among students attending for-profit schools is not exactly a new charge. Federal data released last year showed nearly half of the 650,000 federal student loan defaults between 2011 and 2013 were by students at for-profit schools.
Taking issue
Still, some for-profit schools are finding flaws with the Brookings study’s conclusions. Mark Brenner, an Apollo Education Group executive, whose subsidiaries include University of Phoenix, told Marketwatch the Brookings study was based on “limited data.”
The Brookings study appears to suggest students who are not qualified to attend college – they choose schools that have no admission requirements – are the ones who take on too much debt and default. The authors say a relatively new development is community college students are defaulting on student loans. In the past, the report says, few of these students took out loans to pay for college.
Accounting for 70% of defaults
“By 2011 borrowers at for-profit and two-year institutions represented almost half of student-loan borrowers leaving school and starting to repay loans, and accounted for 70% of student loan defaults,” the authors write. “In 2000, only one of the top 25 schools whose students owed the most federal debt was a for-profit institution, whereas in 2014, 13 were.”
According to the report, the borrowers from those 13 schools owed about $109 billion—almost 10% of all federal student loans. And once out of school, they faced more difficult employment prospects.
For example, the researchers say the median borrower from a for-profit institution who left school in 2011 and found a job in 2013 earned about $20,900 a year. At the same time, 21% were unemployed.
By comparison, community college borrowers earned $23,900 and only 17% were unemployed.”