New Paper Profiles Association Between Student Loan Default, Poorer Academic Outcomes

ACCT paper recommends reforms to the student debt system to alleviate hardships that inhibit student success

December 17, 2020

WASHINGTON, DC—The Association of Community College Trustees (ACCT), in collaboration with Valencia College and with support from the Seldin/Haring Smith Foundation, today released Fault Lines in Borrowing: Academic Outcomes of Students in Default.

“This paper is part of ACCT’s ongoing effort to determine why many fully capable and ambitious community college students have difficulty persisting in college and completing their studies,” said ACCT President and CEO J. Noah Brown. “Though the brief examines data from only one Florida college, the findings demonstrate that loan defaults and their harsh penalties are strongly associated with poorer academic persistence and completion.”

“This snapshot of Valencia College shows how student loan default policies hold back dedicated community college students — and make it harder for them to complete their degrees,” said Seldin/Haring-Smith Foundation CEO & Co-Founder Abigail Seldin. “The Seldin/Haring-Smith Foundation is proud to support this report by ACCT.”

The brief profiles the impact of student loan defaults on Valencia College students, including:

  • Students with a record of default are almost three times as likely to delay enrollment as students with no record of default;
  • Almost twice as many students with a record of default attempted to enroll in one or more semesters in which they subsequently did not take any classes compared with students with no record of default;
  • Students with a record of default had a much lower credit completion ratio relative to students without a record of default; and
  • Fewer than half as many defaulters graduate within 6 years relative to students with no record of default.

“Past ACCT research focused on student borrower behavior in Iowa, Kentucky and Louisiana, and on institutional strategies for reducing default,” wrote ACCT Senior Program Manager Rachel Rush-Marlowe in the brief. “This analysis found that only 23% of Valencia College students who defaulted on their loans graduated within six years of enrolling. In comparison, over 47% if Valencia students who never defaulted graduated within this timeframe. Many consequences of student-loan default are unduly punitive and affect students’ lives profoundly for years to come.”

The paper offers recommended changes to the student debt system to alleviate unnecessary hardships currently placed on student borrowers:

  1. Extend mandatory forbearance until at least September 30, 2021.
  2. Automatically enter students into income-driven repayment after a period of delinquency.
  3. Forgive at least $10,000 in student loans targeted to students most in need, tax free.
  4. Remove prior default from borrowers’ credit histories if the loan has been repaid in full or forgiven.
  5. Pass the Protecting JOBs Act to prevent default-related license suspensions.
  6. Streamline the student loan rehabilitation process to make it more accessible.

Download the brief.

About ACCT

The Association of Community College Trustees (ACCT) is a non-profit educational organization of governing boards, representing more than 6,500 elected and appointed trustees who govern over 1,200 community, technical, and junior colleges in the United States and beyond. For more information, go to Follow ACCT on Twitter @CCTrustees.

 About the Seldin/Haring-Smith Foundation

Established by Abigail Seldin and Whitney Haring-Smith in 2019, the Seldin/Haring-Smith Foundation funds and incubates public interest projects focused on four populations in American higher education: students struggling with basic needs, students with children, students who have stopped out college, and people who have defaulted on their federal student loans. To learn more, visit Follow SHSF on Twitter @shsfunds.