Student borrowing has soared in the past
several years, provoking a lot of hand-wringing and even talk of a crisis.
New data on four million borrowers shed some light on who is doing all this
borrowing and which borrowers are failing to make their loan repayments.
The bottom line, the crisis if there is one, is not concentrated among borrowers
who went to four-year colleges. Let’s start by looking at who has been doing
all this borrowing. The bulk of the increased borrowing is by students who
went to for-profit and community colleges. A big change from the past. And
which students are most likely to default? Those very same students, the
ones who went to for-profit schools and community colleges. Twenty-one percent of
the borrower’s at for-profit schools and community colleges defaulted within two
years but only eight percent of those at four-year colleges and two percent at
graduate schools. Why is this happening? Well for one thing
borrowers who went to for-profit schools or community colleges fared poorly in
the job market. Students who went to for-profit schools or community colleges
tended to borrow less but they also tend to come from lower-income families, were
less likely to complete their programs, and fared much worse in the job market
during the great recession and the ensuing slow recovery. Now the future may
not resemble the past. These borrowing and default trends are not likely to
continue. The improving economy means more people are going to work rather
than school and there’s far more scrutiny by the
government of for-profit institutions. Between 2010 and 2014. the number of new
borrowers at for-profit schools fell by forty-four percent, and the number of new
borrowers at community colleges by nineteen percent. Fewer borrowers at
these schools and a better job market means fewer defaults, eventually. How much
does the US tax system shrink the gap between rich and poor the answer; some
but even after taxes the distribution of income in the United States remains
substantially unequal.