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Piggy bank is turned upside down over graduation cap

Photo illustration by Justin Morrison/Inside Higher Ed | Getty Images

The total student debt in the United States, which is around $1.7 trillion and growing, is being fueled in part by borrowers who left college before earning a degree or credential and can’t afford to repay their student loans, according to a new report.

The report, released today by the Higher Education Advisory Group and the National Association of Student Financial Aid Administrators, delves into the extent to which completing a degree or stopping out influences debt repayment. The authors of the report used U.S. Department of Education data to analyze 3.9 million borrowers across 1,949 institutions who took out loans between 2013 and 2015 and compared it to how much those borrowers cumulatively owed four years later, between 2017 and 2019.

“Entering college is important, but access itself is just not enough,” said Michael Itzkowitz, founder and president of the HEA Group and author of the report. “We need to make sure we have good outcomes for students to ensure they graduate, get a decent-paying job, enter the workforce and are able to pay off their loans.”

That’s harder to do for the roughly 39 million people who have some college credits but no degree or credential. The vast majority of people with a college degree are better off financially than their peers who didn’t pursue higher education, according to a 2023 analysis from the Institute for Higher Education Policy.

The new report from the HEA Group supports that finding.

After four years, noncompleters owed a total of nearly $1 billion more (from $14.9 billion to $15.8 billion) than the amount they initially borrowed, which reflects borrowers who don’t make high enough payments to keep up with accumulating interest on their federal loans, according to the report. By comparison, borrowers who completed their degree or credential owed $3.3 billion less (from $53.2 billion to $49.9 billion) than what they initially borrowed.

“This shows that many who do go and complete their credential have the ability to pay back their loans. They ultimately earn more as they get higher and higher degrees,” Itzkowitz said. “Those who go but never complete are shown to oftentimes earn less and have trouble paying down their loans. This puts them at a higher risk for default, which is the worst-case scenario.”

He said the data points in the report provide more evidence that institutions and the government agencies that support them should focus on both getting students into college and helping them graduate.

“This will prepare their students to be more likely to enter and succeed in the workforce,” he said.

The analysis also found that the likelihood of loan repayment varies by institution type attended and credential earned by borrowers.

Overall balances for borrowers who attended and completed degrees at four-year institutions dropped by 8 percent (from $44.8 billion to $41.2 billion) four years after taking out loans, whereas the overall balances of borrowers who attended those same institutions but didn’t graduate increased by 6 percent ($10.1 billion to $10.7 billion) in the same time frame.

However, the difference between what completers owed versus noncompleters was not nearly as stark for borrowers who attended two-year colleges or certificate programs. And balances increased in all cases after four years: at two-year institutions, total debt for noncompleters increased by 8.6 percent, whereas it increased by 1.8 percent for completers.

And while the market for microcredentials is booming, the total amount owed for borrowers who attended certificate programs, regardless of whether they completed or not, increased by 7 percent.

“This could reflect lower potential earnings after earning a certificate, the high cost of doing so or both,” Itzkowitz said. “When certificate or short-term programs work well, they’re one of the fastest paths to economic mobility … These are also some of the riskiest credentials. While some of them work well, there’s also a disproportionate amount that leaves the majority of students earning even less than the typical high school graduate while also saddling them with debt.”

Borrowers who completed degrees at public and private nonprofit institutions owed less over all after four years, whereas those who didn’t graduate owed more in total.

But at for-profit institutions—many of which have had trouble with the U.S. Department of Education over misrepresenting the cost and quality of their academic programs to a disproportionate number of low-income students—all borrowers, regardless of completion, had higher overall loan balances (13 percent higher for noncompleters; 11 percent for completers) after four years.

“For-profit institutions have been heavily concentrated in granting certificates,” Itzkowitz said, suggesting that “it may be the concentration of where they’re focused that is leading to a pricier education that ultimately leads to a lower salary and the inability of students to pay down their loans over time.”

Sarah Sattelmeyer, project director for education, opportunity and mobility in the higher education initiative at New America, said the data in the HEA Group’s report reiterate support for initiatives, such as the Postsecondary Student Success Grant program, that provide resources for colleges to implement evidence-based programs to improve student retention and completion.

She added that reducing debt will also require a “strong accountability infrastructure, including things like a strong gainful-employment rule that ensure schools are providing high-value programming and not leaving students worse off and without a return on their higher education investment.”

Starting in 2026, a new federal rule will require students who enroll in academic programs that leave graduates with unaffordable debt to sign a disclosure notice.

Jason Delisle, a senior policy fellow at the Urban Institute’s Center on Education Data and Policy, said the data in the report make the strongest argument for completing a bachelor’s degree compared to two-year degrees and certificates.

“We really only see significant differences between completers and noncompleters among bachelor’s degree recipients,” he said. “Finishing that credential seems to align with better loan repayment statistics, unlike the other credentials. That’s more good news for bachelor’s degrees, which runs counter to the negative public perceptions around bachelor’s degrees.”

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