In Debt and In the Dark: It’s Time for Better Information on Student Loan Defaults

Charts You Can Trust | June 28, 2013
Chart of predicted default rates from "In Debt and In the Dark"

Student college loan default rates have nearly doubled in recent years. The three-year default rate exceeds 13 percent nationally. Tracking and reporting default rates is a crucial means of monitoring how well higher education dollars are spent. Yet, the way default data is gathered, measured, and reported by the federal government clouds institutional accountability. Limitations in the data—from not including which types of students are more likely to default on their loans to which majors have more defaults—make it even more difficult for prospective students and their parents to make the best decisions about college loans.

In Debt and In the Dark: It’s Time for Better Information on Student Loan Defaults by Education Sector Research Director Andrew Gillen examines default rates at American colleges and demonstrates how using input-adjusted rates can indicate if schools are doing better—or worse—than expected in preparing their students for success.

By combining federal data from the Integrated Postsecondary Education Data System (IPEDS) and the Student Financial Aid database, Gillen illustrates through a series of charts, how adjusting for just two risk factors affects the range of default rates among colleges with similar students and provides a fuller picture of how well certain schools are preparing students for life after college. Gillen also finds that pairing a school’s default rate with its graduation rate gives an even clearer understanding of college outcomes. These changes would be an immediate improvement to an existing higher education accountability system.

 “Given the importance of defaults, and the recent jump in their numbers,” argues Gillen, “it makes sense for the government to provide more detailed information on defaults, not just as an accountability lever but as a basic consumer right.”

Education Sector partnered with USA Today to examine “red flag” colleges, schools whose default rates exceed their graduation rates. To read its coverage, click here

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