Report: college dropouts with student loans face long-term economic hardship

Black Issues in Higher Education, June 2, 2005

SAN JOSE, CALIF.

College dropouts who took out loans to pay for postsecondary education are likely to face significant, detrimental and long-term financial problems, says 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" examines 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 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, policy-makers 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 Dr. 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. The report is available at www.highereducation.org/rep orts/borrowing/index.shtml.