Seven percent of graduates default on their federal loans within three years
More Virginia community colleges include federal student loans in financial aid packages now than in past years, which also could be pushing up student debt.
Small Loans, High Default Rates
Policymakers tend to focus on stories of scary-high debt, such as a graduate student who owes six figures. But students who owe much less are more likely to default.
The typical loan in default is around $5,000. That’s total, that’s not per year, that’s all that someone borrowed, said Susan Dynarski, a University of Michigan professor of public policy, education and economics.
At Old Dominion University in southeast Virginia, for example, the average graduate with federal debt leaves school owing $23,900, according to federal statistics. But at nearby Tidewater Community College, where the average graduate with debt leaves owing $10,250, twice as many graduates default.
Student loans can create a snowballing crisis for borrowers. Debt that cannot be repaid can lead to default, fees from loan servicers, a damaged credit score, and eventually the garnishment of wages or government benefits. In some states, people can lose their professional licenses or driver’s licenses as a result of defaulted student loans.
A lot of factors determine someone’s ability to repay their loans, including what kind of job they’re able to get after graduation – which can depend on their major and the local economy – and whether they graduate at all.
The small size of loans in default suggests that many borrowers dropped out, Dynarski said. And students who drop out don’t get to enjoy the financial payoff of a higher credential.
At colleges that serve more lower-income, minority and first-generation students, such as community colleges, graduation rates are typically lower. About 38 percent of students who entered public two-year colleges in 2009 graduated, or transferred and completed a four-year degree, compared to 61 percent of students who started at a four-year college, according to the National Student Clearinghouse Research Center. Continua a leggere “Seven percent of graduates default on their federal loans within three years” →
