Dive Brief:
- Colleges and universities can game loan default rates by encouraging students to get permission to defer payment until they’ll no longer be counted in the metric.
- Ben Miller, research director for higher education at New America, argues for The Chronicle of Higher Education that a better measure would look at the number of degrees an institution grants in a given year and compare it to the number of students going into repayment for their student loans.
- Because students only go into repayment when they graduate, drop out, or fall below full-time status, Miller’s measure would indicate whether colleges and universities are churning through students who don’t get degrees but rack up debt, nonetheless.
Dive Insight:
As Miller highlights in his argument, the federal formula for calculating student loan default rates by institution looks at students going into default within three years of beginning repayment. That timeframe gives institutions a way to obscure the numbers and continue receiving federal financial aid even if their performance should alert government regulators. Students who graduate are more likely to pay back their loans so, Miller argues, factoring graduation rates into the formula makes sense.
A new measure would be helpful, but the whole system needs more information about institutions and their students’ borrowing and repayment habits. One issue we have now is massive combined student loan debt and very little information about how to think about it.