The Forgotten Faces of Student Loan Default

Jerry Parshall

The U.S. Department of Education recently released new data on student loan default rates and is touting a success story: The national default rate is 10.8 percent, down from 11.3 percent last year. But this decline doesn’t mean that students are no longer struggling to repay their loans or suffering the consequences of default.

Though data on federal loans is notably poor, over the past three years, researchers have identified certain groups of students who face particularly high risks of default on their federal student loans. The Center for American Progress and others have found that African American borrowers, students who are parents, and low-income students have higher-than-average default rates, in some cases topping 50 percent. Research has also repeatedly demonstrated that students who do not complete college are more likely to default than those who have.

These groups are relatively large and can therefore be studied in depth using the Education Department’s sample survey data, which follow students from when they entered college in 2003 through 2015. However, there are other groups of students with similarly high default rates who often go unstudied because they comprise a relatively small portion of the overall population. These students are an important part of the American postsecondary education system, yet they are too often underserved by it.

This column highlights five groups of students that debt disproportionately burdens and typical analyses neglect: veterans, first-generation college students, students without a high school diploma, students with disabilities, and underrepresented minorities.

Veterans

Veterans can receive substantial education benefits, which ple, the Post-9/11 GI Bill provides veterans with funds to cover their tuition and fees while getbadcreditloan.com/payday-loans-la/sunset/ also offering monthly housing allowances and stipends for books and supplies. Veterans may also be eligible to receive additional financial aid through the Yellow Ribbon Program.

While these funds can cover a significant share of college costs, they may not be sufficient for all veterans and students may not understand how to access them. Furthermore, veterans who served prior to the eligibility period of these benefits e level of assistance, leaving them more reliant on loans.

The data show that veterans who do take on debt have a default rate of 46 percent, compared with 29 percent for students who did not serve in the military. Unfortunately, because veterans comprise a small portion of the overall U.S. population, the data cannot be disaggregated for other characteristics, such as types of college attended, race or ethnicity, and degree completion.

First-generation college students

Prior research has demonstrated that first-generation college students complete their degrees at half the rate of their peers who have at least one parent with a bachelor’s degree. These disparate results extend to loan repayment outcomes. Slightly more than one-third of first-generation students default on their loans, compared with 20 percent of students who have a parent with a bachelor’s degree and 17 percent of students who have a parent with a graduate degree.

The results are even more troubling for first-generation students from low-income families, among whom nearly half default. Table 2 shows that low-income students tend to experience poor repayment outcomes, and these poor outcomes are exacerbated when low-income students are also first-generation college-goers. In fact, low-income, first-generation college students’ default rate is 20 percentage points higher than that of students who are first-generation but not low-income.

Students without a high school diploma

Students without a traditional high school diploma enroll in college at about half the rate of their peers with a diploma. When they do enroll, they have lower college completion rates than diploma-earners. Unfortunately, these students also struggle to repay their loans; GED diploma- earners have a default rate that is more than twice that of those with a regular high school diploma.