The Chronicle of Higher Ed took a look at student loan default rates, and they’re much worse than people had previously thought. A whopping 20 percent of the government student loans that began repayment in 1995 have been defaulted on.
Most colleges look only at a “cohort-default rate,” which measures only those who default on their loans within two years of their repayment. But the longterm figures paint a more accurate, and troubling picture. Fifteen years after repayment begins, 31 percent of government student loans made to community college students eventually go into default. And 40 percent of students who use their federal student loans at for-profit schools default on their loans.
If you break it down further, the numbers show that students of color are disproportionately saddled with student loans that they can’t get out of. Indeed, black students default on their student loans at four times the overall average default rate.
For-profit schools especially cater to a lower-income clientele, and have a student population that’s disproportionately people of color—according to the Career College Association, 43 percent of for-profit college students “are members of minority groups,” and more than 50 percent are the first in their families to go to college. More than 75 percent of for-profit school students hold down jobs elsewhere, too.
As we’ve discussed before, for-profit institutions have capitalized on the recession to win more students, selling people on empty promises of increased job opportunities and guaranteed salary increases. For-profit schools are the fastest-growing segment of the higher education world, expanding at three times the rate of other types of institutions.
Of course, when it comes to student loan debt in general, there are some constant truths: where there is greater need, there are greater levels of debt, and therefore greater levels of loan default. Nearly 20 percent of students who graduated in 1992 with more than $15,000 in debt defaulted on their loans—this is more than double the overall average default rate. In the last decade alone, the number of people graduating with more than $25,000 in debt has tripled.
And defaulting on student loans is easy. For federal student loans, just 270 days of delinquency can send you into default. For private student loans, it takes just four months of non-payment. The long-term picture turns out to be very scary for students who default on their loans. Graduates face a future of collection agencies, possible legal action, garnished wages, increased hurdles to get future loans or make major purchases, not to mention a life locked into decades of staggering debt.
This summer, the Obama administration got in on the for-profit school regulation game, but it’s still just talk. Students’ massive debt, and their ultimate defaults, continue.