What USA TODAY doesn’t say about student loan default rates

USA TODAY published data from Education Sector on 514 colleges and universities in the U.S. that have higher student loan default rates than college graduation rates, which are named “Red Flag” schools. The newspaper reported on a subset of 265 schools where at least 30% of the students borrow. I want to provide two notes of caution on USA TODAY’s report.

First, the report indicates that one third of all of the “Red Flag” schools are community colleges. The data and report do not take into account that some students at community colleges may not attend classes in order to earn a degree. Some community college students attend classes for gaining or improving skills in the short term. As a result, the community college graduation rate may be lower than the graduation rate at other types of schools. This is not an excuse for a high student loan default rate, but a criticism of using graduation rate as a comparison.

Federal methodology for calculating graduation rates is flawed in another important way: it only counts new full-time students. Students who have completed prior coursework and transferred from one college to another are not counted in the graduation rate. This is true for all types of colleges and universities.

Second, the report does not comment on the amount of debt that students have upon exiting college. A comparison of the total cost of attendance and the total student indebtedness may reveal additional patterns with different implications. If students borrow more than the total cost of attendance and then default on the loans, that suggests that students need more intensive financial counseling during enrollment periods.

The full report at Education Sector’s website has additional details that are important for anyone seriously considering this topic.

The implications for higher education marketing and communications professionals are clear. We should price our college degrees while keeping in mind students’ capacities for not only obtaining loans but also paying them back. We should also communicate not only the value of a college education but also students’ financial responsibilities for paying tuition and student loans.

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