Want More Students To Pay Down Their Loans? Help Them Graduate.
August 8, 2018
One hundred billion dollars annually. Nearly $30,000 on average for those earning a bachelor’s degree. That’s how much the federal government and students invest with the hopes of better equipping themselves to fill the jobs of tomorrow. And with most students nowadays needing to take out loans to attend the postsecondary program of their choice, it’s critical that the federal student loan program pay off for all parties involved.
Like with any investment, there’s risk involved. One of the biggest—for both students and the federal government—is that students will enroll in an institution, take out loans, but never complete their degrees. Unfortunately, this is an all too common occurrence, as more than half of students who enter an institution end up leaving without any sort of credential, even eight years later. This scenario often leads to one of the worst outcomes, as student borrowers who drop out with debt and no degree are three times more likely than graduates to default on their loans.
As Congress considers the reauthorization of the Higher Education Act, it’s important to understand the role institutions play as stewards of this massive federal investment. Building off the work of Columbia University Professor Judith Scott-Clayton and Ben Miller from the Center for American Progress, who have both highlighted alarming disparities in student loan default and repayment rates between black and white students, this memo aims to examine the differences in loan repayment rates for different slices of student borrowers: those who complete an award or degree and those who never finish. What we found is clear: students who complete college are more likely to begin paying down their loans than those who don’t.
