Overview of Student Loan Nonpayment Rates
More than 440 U.S. colleges have student loan nonpayment rates exceeding 40%. This includes numerous for-profit schools, as per an Investopedia analysis of federal student aid data. Experts suggest this may indicate a rising trend where colleges leave students with insurmountable debt.
Impact of Resuming Payments
The Department of Education is making efforts to resume payments after pandemic-era disruptions. Michael Ryan, finance expert and founder of MichaelRyanMoney.com, emphasizes that the true cost of college is not only tuition but the debt compared to the income students earn afterwards.
Why Nonpayment Rates Matter
Student loan delinquency has become increasingly concerning since federal collections resumed. Credit scores can be severely damaged for borrowers who fall behind, leading to wage garnishment in some cases.
Repayment outcomes vary greatly by institution. A high nonpayment rate may indicate that graduates do not earn enough to manage their debts or that loans did not offer the expected economic benefits.
Findings from the Investopedia Report
Investopedia’s report analyzed federal student loan borrowers who began repayment since January 2020. These borrowers were over 90 days delinquent on their loans.
The Department of Education categorizes borrowers by their colleges, letting you compare repayment outcomes.
Florida Career College tops the list among schools with over 5,000 borrowers, having 61% of its 28,000 borrowers more than 90 days behind on payments. The reputation of for-profit colleges is further challenged by the frequent difficulties in loan repayments.
Institutions with High Nonpayment Rates
- UEI College-Fresno (California): 56%
- United Education Institute-Huntington Park (California): 54%
- Tulsa Welding School (Oklahoma): 54%
- UEI College-Gardena (California): 54%
- All-State Career (Maryland): 54%
- Vista College (Texas): 51%
- Miller-Motte College (Tennessee): 50%
- Southern Careers Institute (Texas): 50%
- New England Tractor Trailer Training School of Connecticut: 49%
Almost 1,200 colleges have nonpayment rates above 30%, and over 440 institutions are above 40%. Financial pressures due to inflation make student loan repayments harder.
This situation negatively impacts colleges, as stories of students failing to meet repayments deter new enrollments.
Challenges with For-Profit Schools
For-profit colleges are often at the top of nonpayment rankings. Students here tend to borrow more and default on loans more than those at public colleges.
Unaccredited or defunct colleges leave students with worthless degrees and significant debt. A Federal Reserve Bank of New York study shows that for-profit institutions lead to higher borrowing and default risks, along with weaker labor-market outcomes.
Upcoming Education Department Actions
The Department of Education during the Trump administration has focused on accountability regarding student outcomes. Lawmakers are likely to continue reviewing schools with poor repayment records.
High nonpayment rates may reflect the school’s long-term value for future students. Repayment data can signal potential financial struggles ahead for graduates.
Kevin Thompson, CEO of 9i Capital Group, notes challenges such as lower credit scores, reduced consumption, and prolonged stays at home for young adults.