Are Lower-Income Students Really to Blame for the Student Loan Problem?

In a continuing effort to disprove what it calls “the so-called student-loan crisis in the U.S.,” the Brookings Institution recently published a paper in which the authors conclude that the heightened level of student-loan defaults is largely attributable to the actions of non-traditional borrowers: students attending for-profit schools, and the nation’s community colleges.

That for-profit-school borrowers who default on their debt obligations after graduation represent a disproportionately high percentage of all defaulting student-loan borrowers isn’t news. According to a September 2014 report by the Institute for College Access and Success, 44% of the debtors whose loans entered repayment in 2011, only to default in 2013, attended such schools. The ICAS goes on to note that overall for-profit-college-related defaults represent 19.1% of all loans, compared to 12.9% at public colleges and 7.2% at private nonprofit schools.

There is nothing surprising about that, either.

Students at for-profit schools undertake more debt, on average, than their public and nonprofit private-college counterparts ($39,950 vs. $25,550 and $32,300, respectively, according to another ICAS report). This is partly because of the higher average cost of attending for-profit schools ($15,230 in tuition and fees vs. $9,139 for in-state public schools, per the College Board) and, as the Brookings’ researchers note, because typical students of for-profit schools tend to come “from lower-income families and live in poorer neighborhoods” and choose “programs they are less likely to complete.”

The thing that bothers me the most about this analysis, however, isn’t the conclusion the researchers drew from what I believe to be a good faith extrapolation of the data they amassed from a random 4% sample of federal student loan borrowers, or, even, the condescending characterization of the scope of the problem by those who appear to have a narrative to preserve.

Rather, it’s that there is so much more to this story that deserves to be told.

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Mitchell D. Weiss

Mitchell D. Weiss is a financial services industry executive and entrepreneur. He is also an Executive-in-Residence at the University of Hartford, co-founder of the university’s Center for Personal Financial Responsibility and adjunct faculty at Rutgers University. His most recent text, Practical Finance - A Straightforward Guide to Personal and Entrepreneurial Finance, is the basis for the course he teaches at both institutions.

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