For years, higher education has seemed to be nearing a bubble, with many claiming that we are in the midst of a “student debt crisis.” Massive new datasets can help policymakers and researchers to better understand the roots of this crisis and propose possible solutions.
With more than $1 trillion in student debt, it’s clear that there is a problem. A new study by Adam Looney and Constantine Yannelis of the Brookings Institution aims to break down this problem and gain a better understanding into which borrowers are struggling the most.
Looney and Yannelis found that the student debt crisis is mostly concentrated among nontraditional borrowers – borrowers at 2-year or for-profit institutions.
Students at these 2-year or for-profit schools are usually older, less likely to have financial support from parents, and more likely to be from low-income families than students at traditional 4-year institutions. Many nontraditional students are also first-generation college students.
Borrowing has increased so rapidly at for-profit schools that, in recent years, there have been more borrowers than enrollees. Once these students graduate, their outlook is often grim.
After graduation, median earnings for these students was close to $20,000, and 70 percent of student loan defaults are by students who graduated from 2-year or for-profit institutions.
“They borrowed substantial amounts to attend institutions with low completion rates and, after enrollment, experienced poor labor market outcomes that made their debt burdens difficult to sustain. More than a quarter defaulted on their loans within three years and many more are not making progress repaying their loans,” the authors said.
The majority of borrowers with large balances (over $50,000 of student debt) were students who borrowed for graduate school, meaning they were also likely to have higher incomes and low default rates. However, the authors note that almost a third of the students with large balances borrowed for only undergraduate programs, mostly at for-profit schools. These students are really having trouble.
The White House last weekend released a new College Scorecard with data such as average annual cost, graduation rate, and median salary at 10 years after graduation for more than 7,000 higher-ed institutions. Rather than ranking the universities, an idea many had criticized, the government chose to simply offer the Scorecard as a way to access relevant data.
As with all statistics, the Scorecard isn’t perfect. Graduation rates, for example, don’t include students who transfer to another school and are often strongly determined by the types of students that choose to enroll. And the data on median income only includes students who received federal aid and thus report their income each year. Others object to the College Scorecard because it seems to value colleges simply on how much money graduates make rather than the formative experience an education can provide.
Regardless, these new sources of data are an important addition to the higher-ed conversation. Researchers can download the Scorecard’s data for their own analysis, so we will likely see more insights soon.
This data brings us one step closer to improving opportunity and preventing a higher-ed bubble.