According to a new study, “A Crisis in Student Loans? How Changes in the Characteristics of Borrowers and the Institutions they Attend Contributed to Rising Loan Defaults,” student loan delinquency is on the rise, largely driven by a high rate of default among borrowers who attend for-profit institutions. The study, by Adam Looney of the U.S. Department of the Treasury and Stanford’s Constantine Yannelis, analyzes Department of Education data on federal student borrowing and earnings data from tax records. Here are a few highlights:
• Default rates doubled from 2000 to 2011.
• According to the study, the “student loan crisis” is largely due to an increase of “non-traditional” borrowers. These are borrowers attending for-profit or non-selective institutions and who have “relatively weak educational outcomes and difficulty finding jobs after starting to repay their loans.”
• “Traditional” borrowers refers to students at four-year colleges who earn good salaries after college and pay back their loans.
• Federal student loan balances have quadrupled over the last 12 years, exceeding $1.1 trillion. (This is greater than every household debt other than mortgages.)
• In 2011, borrowers at for-profit and two-year institutions accounted for 70% of student loan defaults. In 2000, only one of the top 25 schools with the most federal debt was a for-profit school; in 2014, 13 were.
• More than one in five borrowers who left their for-profit institution in 2011 was not employed in 2011. For community college borrowers, that number was nearly one in six.
The New York Times article, “New Data Gives Clearer Picture of Student Debt” provides more insight into this subject.