When the Default Rate is Higher than the Grad Rate, the College Is Probably Pretty Terrible

Congress’s failure to reach an agreement to prevent a hike in the interest rates on federally subsidized student loans last week has produced a deluge of articles about student debt.

One of the more interesting is this recent piece from USA Today. It turns out that at 265 colleges in America the default rate on student loans is actually higher than the gradation rate. According to the article:

Hundreds of thousands of students are enrolled at the 265 schools, nearly half of which are operated by for-profit colleges, a USA TODAY analysis shows. About one-third of the schools they attended were are public community colleges.

“These colleges should set off a red flag in the minds of prospective student borrowers — and their parents,” says Andrew Gillen, research director for Education Sector, a non-profit, non-partisan think-tank on education policy that gathered the federal data. “Many students at these colleges will no doubt take out loans, graduate and get good jobs. But the high default rates and lower graduation rates suggest that many will not.”

At Brown Mackie College in Kansas City the graduation rate is 21 percent, but the default rate is 23 percent. At ITT Technical Institute’s Norfolk, Virginia campus the loan default rate is 34 percent, but the gradation rate is only 14 percent. At New River Community and Technical College in Beckley, West Virginia, the student loan default rate is 25.7 percent, but the graduation rate is only five percent.

The high default-low graduation schools should indicate something is probably wrong, but note that these two statistics are not directly connected. It is possible for someone to both graduate from an institution and default on his student loans.

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Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer