College Dropouts Who Borrowed for Education Face Long-Term Economic Hardship; New Report Examines Neglected Aspect of Student Loan Trend

SAN JOSE, Calif., May 4 -- College dropouts who took out loans to pay for postsecondary education are likely to face significant, detrimental, and long-term financial problems, warns a new study released by the National Center for Public Policy and Higher Education. Borrowers Who Drop Out: A Neglected Aspect of the College Student Loan Trend is the first report to examine these students who leave the higher education system saddled with a debt that must be repaid, but are without the financial benefits that a college degree provides.

Among the report’s key findings:

- Most students must take out loans in order to attain a bachelor’s degree. However, many students, particularly low- income students, are caught in a double-bind: Borrowing can result in economic hardship for those who drop out, yet avoidance of borrowing may push students to delay entry into higher education, enroll part-time or work extra hours-all risk factors for dropping out.

- Half of all freshmen entering college borrow, and more than 20 percent of all borrowers drop out.

“Even though taking out loans is still a sound investment for most students, policymakers and education leaders can hardly be satisfied when borrowers leave school with no degree, a debt to repay, and a high risk of defaulting on their loan,” says Patrick Callan, president of the National Center for Public Policy and Higher Education. “In some cases, these students are worse off than before.”

The study was written by Lawrence Gladieux, an independent policy consultant, and Laura Perna, Assistant Professor of Higher Education at the University of Maryland, College Park. The authors provide a profile of student borrowers who drop out, and a comparison of these students to other groups, including student borrowers who complete their educational programs.

In addition, the authors identify ways that policymakers and education leaders can improve opportunities for students, including:

- Focus on policies that better prepare students for postsecondary training and that help students understand their educational options, including the appropriate use of loan financing;

- Make college more affordable so as to reduce dependence on loan financing and student employment, especially for those with the greatest need; and

- Strengthen on-campus support for financially and academically at-risk students, to ensure that all students who enter postsecondary education have the resources to help them succeed in attaining a degree.

The report is available on the National Center’s Web site: http://www.highereducation.org .

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The National Center for Public Policy and Higher Education is an independent, nonprofit, nonpartisan organization. It is not affiliated with any institution of higher education or with any government agency. The National Center conducts policy research and fosters public awareness and discussion of public policy issues affecting education and training beyond high school. The purpose of the National Center’s studies and reports is to stimulate public policies that will improve the effectiveness and accessibility of higher education.

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