April 3, 2016

A Lot Of The People Defaulting On Student Loans Dropped Out of College

The National Center for Public Policy and Higher Education published the report
Borrowers Who Drop Out A Neglected Aspect of the College Student Loan Trend in 2005.    Thats a good title.    Its the thing I was looking to find out about.   People will talk about the (alleged) student loan crisis and how so many borrowers are in default.   But rarely does anyone discuss if these borrowers actually finished college or not.   Turns out a lot of those people in default on student loans didn't graduate.   I would argue that the fact that a lot of student loan borrowers are in default isn't evidence that college isn't worth it but instead evidence that dropping out of college you borrowed for is often a financial disaster.

Anyway lets get to the numbers :
In that document, Figure 7 shows that only 2% of borrowers who completed degrees at 4 year schools were in default but 22% of borrowers who dropped out were in default.        Thats a nice graphic representation of how different the default rates are between those who finish and those who don't.

Table 2 in the report has all the data.   From there I get the percent of borrowers who dropped out, are still enrolled, finished with a certificate, got an associates or got a bachelors.   Plus they also give the percent of each of those groups who are in default.

% of borrowers in default
dropped 18.5% 21.8%
enrolled 15.8% 7.2%
cert 2.2% 21.3%
assoc 3.2% 3.7%
bachelor 60.3% 2.1%

As a whole 7.02% of the borrowers are in default.    But 57% of those are people who dropped out.   So for this group at the time 57% of the people defaulting on their loans had dropped out of college.

Only 18% of the people in default had finished bachelors degrees within 6 years.    82% of the people in default had not finished the bachelors they set out to get within a 6 year period.

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