Borrowers with higher student debt less likely to default, study says

By Danielle Haynes  |  Oct. 23, 2017 at 3:25 PM
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Oct. 23 (UPI) -- People who borrow more money to pay for their education are less likely to default on student loans, an analysis of U.S. Education Department statistics indicates.

The analysis by RTI International, published Monday, found that though they face higher payments, students who spend more on their education are in a better position to pay off their loans in the future without defaulting.

The data show that for students who began their postsecondary education in 2003-04, the median amount borrowed for a bachelor's degree was $22,600, the median amount for an associate's degree was $16,000 and the median amount for a certificate was $6,600.

Meanwhile, 8 percent of borrowers defaulted on loans used to pay for a bachelor's degree within 12 years of beginning postsecondary education, 22 percent defaulted on loans for an associate's degree and 44 percent defaulted on loans for a certificate.

"Contrary to popular opinion, it's not just students with large debt burdens who are defaulting. Bachelor's degree earners borrow more, but their default rates are a lot lower," said Erin Dunlop Velez, co-author of the study and a research analyst at RTI.

The study also found that 52 percent of borrowers who began their postsecondary education at a for-profit school defaulted within 12 years. Twenty-six percent who began at a two-year public school defaulted, 18 percent who began at a four-year private, non-profit school defaulted and 17 percent who began at a four-year public school defaulted.

"The for-profit sector can seem attractive to many students, but graduating from public or private non-profit institutions may give students a better chance to be in a situation to ultimately pay back their loans," Velez said.

The latest numbers from the Department of Education show about 44 million U.S. borrowers have a total of $1.45 trillion in student debt. Graduates of the class of 2016 have an average of $37,172 in student loans, up 6 percent from 2015 graduates.

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