Debt Default Without Degree Vulnerability
Taking on postsecondary education loans without completing a credential creates severe financial distress for community college students, as they incur legal debt obligations without obtaining the wage premium associated with a degree.
Picture this
Taking out student loans without graduating is like financing a commercial delivery truck on credit but having the engine break down before making any deliveries. The driver remains legally obligated to pay the monthly vehicle loan, but lacks the commercial income from completed deliveries needed to pay off the debt.
What the evidence says
Only 40% of community college students acquire education-related debt, but 90% of community college students who default on debt left college without earning a degree or certificate.
- Who
- National US postsecondary survey dataset evaluating community college loan holders.
- How
- Descriptive observational analysis of national higher education debt and default statistics.
What to do
Identify student loan borrowers who show early signs of academic withdrawal and target them with immediate retention interventions to prevent default-inducing non-completion.
From the source
"Although only 40 percent of community college students acquire education-related debt, 90 percent of community college students who default on debt left college with no degree or certificate."
Increasing Community College Completion Rates among Low-Income Students: Evidence from a Randomized Controlled Trial Evaluation of a Case Management Intervention