Community College Students Struggle Most with Student Loan Debt

Students who attend community college are defaulting on their loans more often than those who attend a four-year school.

With 70% of students borrowing less than $6,000, this may come as a surprise. However, low graduation rates may explain why so many cannot repay these small amounts.

"Unfortunately, less debt does not equal fewer defaults," writes Andrew Kelly in Forbes. "And default's consequences, like wage garnishment and severe credit damage, can hurt borrowers even more than a bloated loan balance."

Only 7% of young-adult families hold $50,000 or more in debt related to education. In contrast, 58% of the same households have less than $10,000 in this type of debt. These are the graduates who have a difficult time finding a job and paying back their loans.

Ryan Lane for US News suggests three points to help students from defaulting on their loans.

First, he suggests students think about how they are going to juggle all their responsibilities while attending college. They should make sure they can balance all their obligations before taking out the loan.

Next, Lane says students should apply for financial federal aid. According to data from Project on Student Debt, only 29% of students at community colleges apply for federal loans, in comparison with 72% of public four-year school students. These loans come equipped with repayment methods that allow the borrower to manage their debt rather than default.

Third, Lane suggests students stay in school, even as a part-time student, to avoid loans entering the repayment period.

According to data released from the Brookings Institutions on Tuesday, which studied student loan debt from the 1990s through 2010, "among households with some college but no bachelor's degree, the incidence of debt increased from 11 to 41%." While some of these students do hold community college degrees, the majority are college dropouts.

David Leonhardt for Columbus CEO magazine argues that many colleges only graduate about half of the students enrolled, sometimes less, and are not held accountable for it. Financial aid is given to those who need it most, not leaving room for the rest of the student population, while budget cuts causing increases in tuition.

The solution? According to Kelly for Forbes, policymakers need to place their focus on students' ability to repay their loans. While existing plans do try to accomplish this through income-based repayment, they are too generous to graduate students.

"What we need are policies that push students toward more effective and affordable options on the front end: better consumer information, income-share agreements, and risk-sharing that gives colleges skin in the game. Without such policies, we'll continue to see low-debt borrowers who struggle to repay their loans while high-debt, high-income borrowers—graduate students in particular—get all the attention. It's time to acknowledge what the data say and put our priorities in the opposite order." writes Kelly.

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