Heterogeneity by Institution type, attainment, and race/ethnicity

In a previous Brookings report (), co-author Jing Li and I highlight the black-white gap in student loan debt among bachelor's degree (BA) graduates, and show how the gap widens in the four years following graduation

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The value of computing outcomes across all entrants, not just borrowers, is particularly evident when examining heterogeneity across demographic and institutional subgroups. For example, for the 2003-04 cohort, the default rate among borrowers was about twice as high at for-profits as at public two-year institutions (52 percent versus 26 percent). But since less than half of community college entrants ever borrow, compared with nearly 90 percent of for-profit entrants, this understates the differences between these sectors. For-profit entrants default at nearly four times the rate of community college entrants (48 percent versus 13 percent, see Table 2).

In their analysis of three-year cohort default rates, Looney and Yannelis (2015) highlight the rapid increases in defaults among borrowers in the for-profit sector, and to a lesser extent among community college borrowers. I cut the data by institution type as well as by attainment status and race/ethnicity, two important variables that are unavailable in the Looney and Yannelis (2015) analysis. Table 2 shows 12-year borrowing rates, average amounts owed, and default rates among all first-time students, by each of these subgroups.

The table confirms that the growth in default rates across cohorts has been reong for-profit entrants. In fact, the trends here are even more stark than found by Looney and Yannelis (2015), due in part to the large and rapidly growing differences in borrowing rates across sectors. Among all new students entering the for-profit sector in 2004, nearly half had defaulted within 12 years (47 percent), compared to just 24 percent in the 1996 cohort. The default rate for for-profit entrants is nearly four times the rate seen in other sectors, where only 12 to 13 out of every 100 entrants default.

Figure 2, which focuses on borrowers only and projects default rates out to year 20, suggests that default rates in the for-profit sector could ultimately approach 70 percent.

Defaults have also risen most rapidly among students who never complete an associate's or bachelor's degree. While much attention has been given to the high rates of default among dropouts (24 percent), defaults are actually even higher among those who complete a postsecondary certificate (28 percent). This is despite relatively low levels of average debt in these groups. Though not shown in the table, the new data confirm a previously-documented pattern that defaults are highest among those with small debts: 37 percent of those who borrow between $1 and $6,125 for undergraduate study default within 12 years, compared with 24 percent of those who borrow more than $24,000.

While prior work has raised alarm bells about the crisis for African-American borrowers (Miller, 2017), the new data should ring the alarm even louder. As shown in Table 2, nearly 38 percent of all black first-time college entrants in 2004 had defaulted within 12 years, a rate more than three times higher than their white counterparts, and 13 percentage points higher than black students entering just eight years prior. Focusing on borrowers only and projecting default rates out through year 20 (as shown in Figure 3) suggests that 70 percent of black borrowers may ultimately experience default.

The Special case of Black ba graduates

Unlike for other demographic groups, for black students the debt crisis is not limited to dropouts and for-profit entrants. 9

The newly released data tracking entrants for 12 years allow the tracking of BA graduates for an even longer follow-up (for the vast majority who take less than 8 years to complete their BA), and produce even more alarming results. While our previous report found that the black-white gap in total debt tripled after graduation, Table 3 below shows that with longer follow up the gap more than quadruples, from $10,301 24 hour payday loans Kaufman at graduation to $43,372 at the end of the 12-year follow-up. The increasing gap over time is due both to higher levels of graduate school borrowing among black BA completers, as well as lower rates of repayment.