Why Are Student Loan Defaults Such A Surprise: No Jobs Equal No Money

Students who did not graduate were more likely to become deliquent or default. The new numbers are likely to be used in the Congressional debate over for-profit colleges. Those colleges’ students make up about 12 percent of the nation’s college enrollment, and get a quarter of all federal student aid — but they account for almost half of all students who default.

The Department of Education has proposed regulations that would cut off federal aid to programs whose students graduate with high debt-to-income ratios. But an intense lobbying effort is under way to prevent those regulations from being put into effect.

Tuition Rising Rapidly
With tuition rising more rapidly than inflation or family incomes, student borrowing has been growing. College seniors who graduated in 2009 had an average of $24,000 in student loan debt, up 6 percent from 2008, according to an annual report from the Project on Student Debt.

Job Market
For many young people in a bleak job market—15 percent of black new college graduates are unemployed, twice that of white grads—student loans are easy to fall behind on, and also notoriously impossible to discharge. Companies have the indefinite right to garnish borrowers’ wages at a rate of up to 15 percent of a person’s take-home pay. Filing for bankruptcy, even dying, won’t allow someone to discharge their debt. Only 270 days of delinquency can send someone into default.

Students Of Color
Not only are students of color more likely to depend on financial aid to get through school, but they’re also more vulnerable to defaulting on their loans. Black students default on their loans at four times the rate of other students. Students of color are also more likely to enroll in for-profit schools, and more likely to face economic and academic barriers in any arena of higher education that make it harder to graduate.

New Numbers
The new numbers are likely to be used in the Congressional debate over for-profit colleges. Those colleges’ students make up about 12 percent of the nation’s college enrollment, and get a quarter of all federal student aid — but they account for almost half of all students who default.

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