If you thought attending community college was a good way to avoid student loan debt, think again.
At least that is what some experts are saying after a new study from the Association of Community College Trustees (ACCT) claimed that students who borrow the least are actually the most likely to default on their student loans.
The report used data from Iowa’s 16 community colleges and found that 27.8 percent of students who entered repayment in 2011 had defaulted on their federal loans by January 2015.
While fewer community college enrollees have to take out loans in the first place, the students who do are much more likely to default.
Just 17 percent of community college students take out federal loans, compared to the 48 percent who borrow at four-year public colleges, according to the ACCT report. However, the national default rate for community college students three years after entering repayment is 20.6 percent, compared to the overall average of 13.7 percent.
While it appears to be an unexpected result, there are a couple of likely reasons for this trend.
Not only do more low-income students attend community college, 60 percent are enrolled part-time, according to the American Association of Community Colleges. Many are working and/or raising children at the same time and taking classes on the side.
The report also found that a significant portion of community college students who defaulted on their loans took no action to repay their debt. Almost 60 percent did not use loan forbearance or deferment options to postpone their payments, and two-thirds of defaulters made no payments on their loans at all.
What’s more, most defaulters fail to earn a degree, making repayment even more difficult. Almost 90 percent of students who defaulted on their loans left college in debt and without a degree to show for it.
The take-home point from this report: The problem is not necessarily the amount of debt students are taking on, but rather how that debt is managed.
The ACCT stresses the need to simplify federal student loan programs and repayment options, and recommends colleges provide students with better academic and financial aid counseling.
