Guest blog post written by Larry Gladieux and Laura Perna, authors of “Borrowers Who Drop Out.”
A headline on the Business page of the Washington Post March 11, 2012, read “Student loans seen as potential ‘next debt bomb’ for U.S.”
The article was a staple of higher education journalism: all about college graduates–degree holders–who have problems repaying their loans, and of course some of them do.
Missing in the article, however, was any mention of students who do NOT complete their programs and are also saddled with debt.
With support from the Lumina Foundation, we analyzed this problem in 2005, and the National Center for Public Policy and Higher Education published our analysis, “Borrowers Who Drop Out.” We concluded that “there are significant, negative, and lasting consequences of the current system of financing higher education in the United States, particularly for students from low-income and lower-middle-income families.”
Seven years later, we are very pleased that Mary Nguyen has updated our analysis, and Education Sector has published “Degreeless in Debt.”
Unfortunately, the update shows that trends have worsened. More students are borrowing to finance their education, more students are dropping out, and dropouts are more likely to be unemployed, make less money than graduates, and are four times more likely to default on their loans. And when they default, as Mary Nguyen says, “they experience devastating consequences.” Mary also concludes that these trends are most pronounced in the for-profit sector of postsecondary education.
College prices have outrun the Consumer Price Index since 1980, and if that trend continues, so will the growth in student loans. There are no easy remedies, though our 2005 report does provide recommendations for schools, colleges, government, communities and the private sector. The recommendations that we offered then are more important now than ever before: policy makers need to ensure that students are better prepared to succeed in postsecondary education, and students must better understand their educational options, including the appropriate use of loan financing.