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National 3-Year Cohort Default Rate Drops For Third Consecutive Year: 91探花Continues to Excel

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The Department of Education recently released their detailing the 3-year cohort default rate (CDR)鈥攁 metric that measures what percentage of postsecondary students default on their loan payments within the first three years of entering repayment鈥攁nd the data are encouraging: the 3-year CDR for FY 2012 is 11.8 percent, almost two percent lower than the previous year and three percent lower than FY 2010.

While reasons for the drop are uncertain, administration officials have credited the increased enrollment in income-based repayment plans as partially responsible. Secretary of Education Arne Duncan has cheered the lower default rate but cautions that there is more work to do. 鈥淭here鈥檚 no real reason why we can鈥檛 significantly reduce default rates even further,鈥� he told reporters in a statement . 鈥淲e鈥檙e going to keep working to hold schools accountable.鈥�

The report also breaks down the CDR by . Below is a breakdown of the most salient statistics.

National statistics:

  • Public four year institutions saw their 3-year CDR drop to 7.6 percent, down from 8.9 percent last year.
  • Private non-profit four year institutions鈥� default rate also dropped, to 6.3 percent from 7 percent.
  • Private for-profit four year institutions鈥� CDR dropped to 14.7 percent, down from 18.6 percent last year.

State statistics:

  • Schools in Washington state have an average 3-year default rate of 10.1 percent, slightly听below the national average.
  • The 91探花 performed exceptionally well by this measure: the 3-year CDR for 91探花dropped to 2.7 percent, almost 5 percent lower than the national average for public four year universities and听down from 4.3 percent last year.

As previously stated, the declining CDR average nationwide is a hopeful sign for the future of student loan repayment. Nevertheless, loans remain a massive strain on millions of college students and graduates and more must be done to alleviate the student debt burden. The CDR itself has come under fire as a flawed metric; it only measures those students who default on payments and does not take into account the who make payments but cannot make any progress on paying down their debt or the share of students at a given institution who borrow.听Some in the education policy world have called for using loan repayment rates, rather than default rates, as听the primary metric for gauging an institution鈥檚 ability to prepare its students for repayment.

 

Average Debt for Graduates Continues to Rise

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Overall student debt levels of recent bachelor鈥檚 degree recipients continue to rise according to , a new report from the Project on Student Debt at The Institute for College Access & Success (TICAS). 听The report includes 2013 state- and college-level debt data for graduates from colleges that opt to disclose their graduates鈥� debt. However, since very few for-profit colleges choose to disclose debt data, the report鈥檚 figures represent only public and nonprofit colleges.

  • At the national level, 69 percent of graduating seniors had student loans and those that borrowed had an average debt of $28,400 鈥� a 2 percent increase over 2012. For comparison, in 2013, 50 percent of 91探花undergraduates graduated with debt, and those that borrowed graduated with an average debt load of $21,471.
  • At the state level, borrowers鈥� average debt at graduation ranged from $18,656 to $32,795, and the likelihood of graduating with debt ranged from 43 to 76 percent. In six states, average debt was greater than $30,000; in one state, it was under $20,000. Nearly all the highest debt states were in the Northeast and Midwest, with the lowest debt states in the West and South. In Washington, 58 percent of graduates had debt, and those that borrowed had an average of $24,418 in loans. Debbie Cochrane, research director at TICAS and coauthor of the report, says, 鈥淭he importance of state policy and investment cannot be overstated when it comes to student debt levels.鈥�
  • At the college level, borrowers鈥� average debt at graduation varied widely 鈥� ranging from less than $2,500 to more than $71,000 鈥� and the likelihood of graduating with debt also varied 鈥� running from 10 percent to 100 percent. At nearly one in five (18%) colleges, average debt rose at least 10 percent, while at 7 percent of colleges, average debt decreased by at least 10 percent. In general, colleges with higher costs had higher average debt at graduation, although that wasn鈥檛 always the case.

The authors note that the report鈥檚 data have significant limitations, primarily because colleges are not required to report debt levels for their graduates. Only 57 percent of public and nonprofit bachelor鈥檚 degree-granting colleges provided data, representing 83 percent of graduates in those sectors. And , as mentioned, were excluded because hardly any chose to disclose their graduates鈥� debt.[1] Even colleges that do provide data may understate graduates鈥� debt loads because they do not include transfer students and are often not aware of all private loans.

Thus, the report鈥檚 main recommendation is to get better debt data via federal collection of cumulative student debt data for all schools. The report also makes recommendations about reducing students鈥� need to borrow, helping students make better-informed college decisions, and simplifying .

See the report or TICAS鈥� for more information.

[1] for 2012 graduates of for-profit. four-year colleges show that the vast majority (88%) took out student loans and that borrowers graduated with an average of $39,950 in debt鈥�43 percent more than bachelor鈥檚 recipients in the other sectors. In addition, students at for-profits tend to much more frequently than students in other sectors.

Final Gainful Employment Rule Removes Default Rate Metric

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The Education Department鈥檚 (ED) final 鈥済ainful employment rule,鈥� which was released yesterday, will hold vocational programs accountable to just one of the two outcome metrics that were proposed in the .听 Cohort default rates (CDRs) were eliminated from the legislation, meaning that debt-to-earnings ratios will be the only听criteria upon which individual career education programs are evaluated to determine听federal aid eligibility.

Community colleges had for the change on the grounds that a relatively small number of their students take out federal loans and, thus, cohort default rates are 鈥渕aterially and statistically unrepresentative of all the students in a program.鈥�

Student and consumer advocates, however, have contended that the change weakens the rule and doesn’t do enough to protect students and taxpayers. Pauline Abernathy 鈥� Vice President for The Institute for College Access & Success (TICAS), a consumer advocacy group 鈥� issued a yesterday saying:

鈥淲e and more than 50 student, civil rights, veterans, consumer, and education organizations urged the Obama Administration to strengthen its draft gainful employment regulation, but instead this final regulation is even weaker. The final rule also does not provide any financial relief to students who enroll in programs that lose eligibility; lets poorly performing programs enroll increasing numbers of students, right up to the day the programs lose eligibility; and even passes programs in which every student drops out with heavy debts they cannot pay down.鈥�

For-profit colleges with the outcome either, arguing that the legislation does nothing to fix a proposal they see as being “fundamentally flawed.”

Arne Duncan, the education secretary, estimates that 1,400 programs鈥�99 percent of which are at for-profit colleges鈥攚ill fail the rule in the first year. However, that number is 500 less than it would have been under the March version of the rule. Unfortunately, of those 500 programs, 15 are ones where students are more likely to default than they are to graduate. 听See the for more information.

Since programs will only become ineligible for federal aid after they fail the debt-to-earnings tests twice in a three-year period or are 鈥渋n the zone鈥� for four consecutive years, institutions will not face penalties for at least three more years. Therefore, it is possible that the gainful employment rule will be revised yet again before its effects are truly felt.

ED Releases New PLUS Loan Rules

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It will soon be easier for students and parents with adverse credit histories to qualify for federal PLUS loans. 听Under new the Education Department鈥檚 (ED鈥檚) 鈥� which were released on Wednesday and are expected to take effect in March 鈥� ED will review only two years (rather than five) of a prospective borrower鈥檚 credit history to determine loan eligibility, and will excuse up to $2,085 in certain types of delinquent debt听when running initial credit checks.

ED agreed to revisit the rules following pressure from many colleges and families who were angered after ED tightened the PLUS loan standards in 2011. The 2011 changes resulted in thousands of sudden loan denials and, consequently, enrollment declines and revenue losses at some institutions. According to , department officials expect that the new standards will allow an additional 370,000 applicants to pass the initial credit check for PLUS loans.

Representative Chaka Fattah 鈥� Pennsylvania Democrat and co-chair of the Congressional Black Caucus Education Task Force 鈥� ; however others connected with historically black colleges have for not moving quickly enough.听 Meanwhile, some policy analysts and consumer advocates to prevent borrowers from being saddled with unmanageable debt, and that the new rules don鈥檛 do enough to safeguard against default.

If defaulting becomes an issue as a result of the new standards, the silver lining is policymakers will at least know about it and, hopefully, be able to do something. As part of ED鈥檚 changes to the PLUS program, the department will begin calculating and publishing annual cohort default rates for institutions receiving PLUS loans.[1] That information should help illuminate whether borrowers are getting in over their heads.

Ultimately though, as points out:

鈥淭he Department must do a better job reaching out to parents and helping them understand the terms and conditions of their loans, including the ability to repay their loan as a percent of their income if they consolidate into a Federal Direct Consolidation Loan. Better counseling won鈥檛 solve all the issues with the PLUS loan program. But it鈥檚 a start until we can ensure PLUS loans are a safe product for families and we can improve access to better aid options like grants for low-income families.鈥�

[1] ED currently only calculates cohort default rates for colleges that receive Stafford loans.

91探花Cohort Default Rate Remains Very Low Relative to National Average

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The U.S. Department of Education (ED) recently released its annual update on federal student loan cohort default rates (CDRs), which measure the frequency with which student borrowers at all levels (undergraduate, graduate, etc.) default on their federal loans. Although the UW鈥檚 CDR rose while the national CDR declined, the UW鈥檚 rate still remains well below that of the nation.

ED is in its first year of using only the听more accurate three-year CDR measure 鈥� as opposed to the two-year CDR. Thus, this year鈥檚 report only includes the FY2011 three-year CDR, which represent the percentage of student borrowers who entered into repayment in FY2011, but failed to make loan payments for a 270-day period within three years of leaving school.

The Department provides breakdowns of its data by , and . Here are some key findings:

  • The national three-year CDR declined from 14.7 to 13.7 percent overall.
  • The three-year rate decreased over last year鈥檚 rates for all sectors:
    • Public institutions decreased very slightly from 13.0 to 12.9 percent,
    • Private nonprofits decreased from 8.2 to 7.2 percent, and
    • For-profits鈥� whopping 21.8 percent rate decreased to 19.1 percent.
  • The UW鈥檚 three-year CDR increased slightly from 3.9 to 4.3 percent, but this is still nearly 10 percentage points below the national average.听

While this is good news, many students still struggle to afford ever-increasing tuition fees and/or to repay their student loans. The 91探花reaches out to our former students at risk of default on their Stafford Loans and helps identify federal repayment options that could benefit them.听Former 91探花students who are in default or experiencing difficulties repaying their loans can contact the Office of Student Financial Aid for assistance (osfa@uw.edu, 206-543-6101). Students can also visit to explore their repayment options.

Congress Introduces Bills to Reauthorize Higher Education Act

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As the UW’s Office of Federal Relations reported on their , yesterday Senate Democrats released to reauthorize the Higher Education Act (HEA). Their proposal focuses on four main goals:

  • Increasing affordability and reducing college costs for students,
  • Tackling the student loan crisis by helping borrowers better manage debt,
  • Holding schools accountable to students and taxpayers, and
  • Helping students and families make informed choices.

In addition, today the House Committee on Education and the Workforce introduced reauthorization-related bills of their own, including:

For more information, check out the and a recent . 听We’ll post more information on OPBlog over the coming weeks.

“Degree Attainment Around the World (Cup)”

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On Monday, The Equity Line posted the following piece about how the U.S. compares to the other World Cup countries in terms of degree attainment.

Posted on June 16, 2014 by Kayl茅 Barnes and Joseph Yeado

“Defying commentators, critics, and prognosticators, the U.S. has already performed quite well against the other nations competing for the 2014 World Cup. Yes, the competition on the field only started last Thursday and the Yanks have yet to kick things off today, but the U.S. is beating most of the competition in another competition: college attainment.

Among the 32 teams competing in Brazil, the United States ranks third for the percentage of adults with a 2-year or 4-year college degree.

It may look like America has trounced the competition, but there are two important facts that put these figures into perspective.

In 1990 the United States soccer team qualified for its first World Cup after a 40-year drought. Though it failed to win a game and was sent home, the U.S. was ranked first in the world in four-year degree attainment among young adults. Since that time, our men鈥檚 national soccer team has steadily improved, but our college attainment rates have not. The United States now ranks 11th among developed nations for young adults with college degrees.

The U.S. may compare favorably to other World Cup countries, but the data still mean that only 2 in 5 adults have some kind of a college degree. In fact, just 59 percent of students at a 4-year college will earn a bachelor鈥檚 degree in six years 鈥� not to mention that black and Latino students complete at even lower rates (40 percent and 52 percent, respectively). Ranking well relative to other countries doesn鈥檛 mean much when we are leaving so many of our students behind.

Third place is not good enough. More important to our country鈥檚 well-being than winning the World Cup is whether we have an educated population prepared to face the challenges of the new global economy. Higher education leaders and policymakers should look to the example of the colleges and universities across the country that are leading the way to improve student success and proving that low graduation rates are not inevitable.

The expectations of American soccer supporters have risen steadily since 1990, and millions are tuning in to watch our boys play in Brazil. It鈥檚 time that we raise our expectations about college attainment and the equity in attainment levels.

Only then can the United States realize its gooooooaaaaals of being first in the world on the f煤tbol pitch and in degrees.”

Higher Ed News Roundup

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Here’s a quick roundup of some of this week’s headlines in higher ed news.

听

According to a study commissioned by the Association of Private Sector Colleges and Universities, up to 44 percent of students at for-profit colleges could lose access to federal financial aid under the latest 鈥�鈥� proposal. The authors of the report鈥擩onathan Guryan, an economist at Northwestern University, and Matthew Thompson of Charles River Associates, a consulting firm鈥攁rgue that since for-profits tend to serve students who have fewer financial resources and less academic preparation, the proposed rules would leave students without other options. Additionally, the report asserts that the rules should not be based on short-term measures of earnings and student debt, as such metrics tell an incomplete story. The Department of Education the proposed rules in March. The window for public commenting closed on Tuesday. 听This report was part of a final lobbying campaign by both sides.

Several startups have begun serving as matchmakers between community college students and employers. One of the startups, called WorkAmerica, states that it will provide students with a legally binding job offer before they enroll at one of the startup鈥檚 partner colleges. WorkAmerica has already started placing students into trucking programs, and plans to expand to other 鈥渉igh churn鈥� employers, such as those that hire welders, IT technicians, and medical assistants.听 Another similar startup, called Workforce IO, connects employers with 鈥渢rainers鈥濃�攚hich can include community colleges, in addition to nonprofits and other mentoring agencies. The company uses a library of 275 job-skills 鈥渂adges鈥� to vouch for its workers鈥� skills. In an era when students are increasingly concerned with their post-graduation employment opportunities, it鈥檚 possible that such a model could be applied to some programs at four-year institutions.

Research shows that not only is a college degree is worth the time and money it takes to earn one; it鈥檚 worth more than ever.听 According to analysis of Labor Department statistics by the Economic Policy Institute, the pay gap between college graduates and those who either never went to college or never graduated from college, reached a record high last year. The NY Times article summarizes, 鈥淎mericans with four-year college degrees made 98 percent more an hour on average in 2013 than people without a degree. That鈥檚 up from 89 percent five years earlier, 85 percent a decade earlier and 64 percent in the early 1980s.鈥�

Ryan Budget Would Hurt Pell Grants and Student Loans

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Representative Paul Ryan, the House Budget Chairman, released his FY15 on Tuesday. The proposal would remove the in-school interest subsidy for all subsidized undergraduate student loans, eliminate mandatory funding for Pell Grants, and freeze the maximum Pell Grant award at $5,730 for the next 10 years.

As Office of Federal Relations put it in their , 鈥淭hat essentially means that $870 in the maximum grant would have to be funded by increased discretionary funds or the maximum be cut from $5,730 to $4,860.鈥�

Please see the Federal Relations for more information, and check out articles by , , and .

New Report Suggests Graduate Student Debt Deserves Legislative Attention

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A recent report by New America, titled , reveals that much of the nation鈥檚 鈥�$1 trillion in outstanding federal student debt鈥� is the result of expensive graduate and professional degrees, rather than unaffordable undergraduate educations.

The report, which analyses recently publicized data from the Department of Education, shows that around 40 percent of recent federal loan disbursements are for graduate student debt. Moreover, the paper shows that graduate student debt across a variety of fields鈥攏ot just business school and medical school鈥攃omprises some of the largest increases in student borrowing between 2004 and 2012.听Thus, the authors recommend that legislators, journalists, and the public at large adjust their understanding of student debt to recognize that it鈥檚 not just undergraduate problem.

Most news stories highlight the debt of graduate students鈥攚hich tend to have much larger loan balances鈥攜et journalists typically don鈥檛 differentiate graduate debt from undergraduate debt.听 makes a compelling argument for why this lack of differentiation is a problem and why it deserves legislative attention:

鈥淭he failure to distinguish between undergraduate and graduate debt in discussions of college costs is a serious flaw in how we think about student debt. Students, families, and taxpayers invest significant resources in financing 鈥渃ollege,鈥� largely because a bachelor鈥檚 or associate degree is a must for anyone who wants to secure a middle-class income… But arguments for high levels of subsidy for students who attend graduate and professional school are on shakier ground. While a graduate or professional degree boosts a student鈥檚 earnings prospects and the economy at large, it is not the foundation for economic opportunity and middle-class earnings that a two- or four-year degree now provides. Students pursuing graduate degrees should be far more informed consumers. Therefore, they shouldn鈥檛 need a lot of public support to finance their next credential, which is why there are no Pell Grants for master鈥檚 degrees. That spike in debt for graduate degrees should also focus policymakers鈥� attention on an impending tidal wave of loan forgiveness for graduate students and the lack of loan limits for students pursuing graduate degrees.鈥�

You can read more about New America鈥檚 report at and .