Growing student enrollment, rising tuition costs, increasing student debt, and a weak economy have resulted in a disturbing trend that is affecting students, institutions, and taxpayers alike: More students defaulting on their student loans.

The consequences for students are obvious. Those who default suffer damaged credit ratings, which can negatively affect future job prospects and quality of life. They are also subject to wage garnishment, potential lawsuits and denial of future education funding.

But the effect on institutions can be dire as well. Schools with high "cohort default rates," a measure calculated annually by the U.S. Department of Education, risk losing their eligibility for federal student aid. The idea is that these schools, with a large percentage of former students are unable to repay their student loans, are not providing a quality education, and thus shouldn't benefit from federal aid. For many schools, losing access to federal grant and loan funds puts their very survival at risk.

Last year, we saw the largest increase in cohort default rates since 1989. And looming changes to the way the department calculates a college’s default rate promise to result in even greater increases. The current default rate is calculated as the percentage of students who default within two years of leaving school. The new calculation will increase that timeframe to three years. As a result, it will catch more students who default and cause default rates to increase for nearly every institution – putting more colleges at risk of facing federal sanctions.

Career colleges as a whole are most at risk, with current cohort default rates averaging 11 percent, 60 percent higher than the overall rate for all schools. That number is expected to nearly double when the new calculation goes into effect. It is no surprise then that those representing career colleges have argued against the idea of punishing schools for high cohort default rates. These high rates, they say, are a consequence of the type of students they serve—large numbers of low-income and first-generation students who, with a high likelihood of dropping out and low likelihood of having family resources to rely on, are more likely to default. As such, it's unfair to use student default rates as an indicator of institutional quality.

But disconnecting default rates from institutional quality also suggests that institutions do not play a role in whether or not a student defaults. In a new report, Lowering Student Loan Default Rates: What One Consortium of Historically Black Institutions Did to Succeed, we investigate this implication, looking specifically at the role institutions play in helping their students avoid default and just how much of a school's cohort default rate could be explained by the characteristics of the students it enrolls and how much could be attributed to institutional characteristics.

The good news is that you do matter. Just as institutions matter in getting their students to graduate and potentially succeed in future endeavors, they matter in helping students avoid the long-term consequences of defaulting on their student loans. And although student characteristics are a factor in predicting a school's cohort default rate, they are not the sole factor and in many cases they are not the most significant factor. For-profit colleges, then, don’t have to just hope their default rates stay low—there are specific strategies they can take to help their students avoid default.

Among the schools we profile in our report, educating students about debt was particularly effective in reducing default rates. These institutions took loan counseling very seriously, making sure they did it in-person and frequently, as often as every semester. Financial aid staff made sure to explain to students the loan’s monthly payment amount, the salary needed to repay the debt, and the negative consequences of falling behind on payments.

These institutions were also careful about how much loan aid they offered students—providing enough for students to pay their bills, but not enough to finance a lifestyle. If students requested additional loan aid, they received more counseling first, about the ultimate cost of the extra loan dollars and how much more they needed to earn to repay it.

Finally, improving retention and graduation rates is essential to any default prevention plan. According to the Department of Education, 70 percent of the defaults in its loan portfolio are from students who did not earn a degree. The institutions we studied used several strategies to improve graduation rates, including monitoring course attendance, grades, and credit accumulation, all of which can provide early warning signs of a struggling student at risk of dropping out. They encouraged faculty and staff to make personal contact with students, and they made retention and graduation, along with default prevention, a campuswide concern. Everyone, from the top leadership to administrative staff, understood that student success was his or her responsibility.

While it is the responsibility of students to honor their financial commitments, the burden should not rest on the student alone. Institutions of all types benefit from the availability of student aid, making it possible to secure enrollment, stay competitive, and attract a diverse student body. As such, these institutions have a responsibility to help their students avoid the dire consequences of default. Fortunately, there are steps institutions can take to reduce default rates, and at the same time improve the success of their institution as a whole.