The students behind the U.S. student loan debt crisis

Student loan debt isn’t what we thought it was.

Instead of students at private colleges racking up hundreds of thousands of dollars in loans and ending up without the means to pay, new data shows that students who attended for-profit and community colleges and took out much smaller loans are driving student loan debt.

Susan Dynarski, a professor of education, public policy and economics at the University of Michigan, addressed the data, which involves $1.2 trillion borrowed by 40 million people, in a news analysis for The New York Times’ The Upshot.

She wrote:

This data is important because so much of the discussion of student loans and the angst over them has focused on graduates of four-year colleges. But most of those graduates are doing just fine. The situation is quite different, and grimmer, for the vast majority of borrowers.

The student debt loan problem is largely affecting lower income families or sometimes older people, struggling to acquire new skills in a changing economy.

Many students don’t graduate with degrees from the for-profit colleges, even though the programs can be much shorter than a typical bachelor’s program. Even if they do graduate, they are less likely to find a job, especially one that pays well.

Dynarski wrote:

The new findings are consistent with earlier data — such as statistics showing that default rates are actually lower among borrowers with large loans than among borrowers with small loans.

During the Great Recession, particularly at its 2008 peak, she added, millions of students went back to college rather than into the weak job market.

Traditionally, community colleges would have seen applications spike, but those small institutions made it clear they didn’t have the funds or capacity to take them in. So students sought admission at for-profit colleges.

This week, the president moved forward a proposal that could help to address that.

On Sept. 9, President Obama proposed Heads Up America. The campaign seeks to raise awareness and support for America’s College Promise, which would offer financial aid to promising students at community colleges to fund the first two years of their bachelor’s degrees.

Back in the Times piece, Dynarski wrote:

Any proposed solution that does not focus on borrowers at for-profit colleges and community colleges will not address the core of the problem.

Reach Elaina Zachos at ezachos@publicsource.org.