Student loan default rates have doubled in the last decade and new research indicates the bulk of the increase is tied to the number of non-traditional borrowers attending two-year colleges and for-profit schools.
"Between 2000 and 2014, the total volume of outstanding federal student debt nearly quadrupled to surpass $1.1 trillion, the number of student loan borrowers more than doubled to 42 million, and default rates among recent student loan borrowers rose to their highest levels in 20 years,” according to the research.
Non-traditional borrowers often come from lower income families, attend colleges with relatively weak educational results and experience poor outcomes in the labor market upon leaving school, according to Looney and Yannelis.
“Default rates among borrowers attending most four-year public and non-profit private institutions - and graduate borrowers who represent the vast majority of the federal student loan portfolio - have remained low, despite the several recession and their relatively high loan balances,” according to the report.
More than 25% of borrowers leaving college during or shortly after the recession defaulted on their loans within three years, according to the research.
“The changes in borrower characteristics and colleges they attend explain the largest share of the default rate in the U.S.,” according to the report.
Susan Dynarski, a University of Michigan professor of education, public policy and economics, recently wrote, of the report: "The data suggests that many popular perceptions of student debt are incorrect. The huge run-up in loans and the subsequent spike in defaults have not been driven by $100,000 debts incurred by students at expensive private colleges like N.Y.U. The traditional borrowers from four-year colleges tend to earn good salaries out of college and pay back their loans."