Student loan repayment is easier for students who earn a degree, according to a new study released by the Institute for Higher Education Policy (IHEP). The Washington, D.C.-based organization found that college graduates are more likely to repay their debt because they’re also more likely to earn a higher income than those who do not graduate.
Graduation Makes a Difference in Avoiding Loan Delinquency
The IHEP study, Delinquency: The Untold Story of Student Loan Borrowing, was meant to take a hard look at patterns of delinquency in students who have and have not graduated.
It found that 22 percent of borrowers who graduated from college became delinquent without default (meaning they eventually began to repay their loans), while 33 percent of those who left school without a credential became delinquent without default.
As for those who did default on their loans, 16 percent of those who graduated were unable to meet their repayment expectations while 26 percent of those who left school without a credential defaulted.
The study found the main reason graduates had less trouble repaying their loans is because they were able to acquire higher-paying jobs that provided them with the income they needed to keep up with payments.
Making Repayment a Bigger Possibility
The study proposed that schools consider programs that focus on student success and completion to encourage more to actually complete their studies and increase their chances of earning higher income. Researchers believe this step could help reduce the number of student loan defaults.
In addition, they acknowledged that for-profit two- and four-year institutions have higher delinquency rates than students who attended public and private nonprofit four-year institutions. The IHEP study acknowledged that policyholders need to search for ways to reduce the cost of college, as well as the need to borrow.
Adjustments geared toward student success and away from profit-making, the study showed, the could help students not only repay their debt, but eventually eliminate the need for loans altogether while creating more graduates who could make a difference in society.
