Stories about staggering loads of student debt are everywhere, from the business school alums with loans worth six figures to the college graduate who faces $800 monthly loan payments.
But dig deeper, and a very different picture of the student debt crisis emerges. Those most at risk of defaulting on their loans turn out to be those who borrow the least, according to a recent study for the Association of Community College Trustees.
The report focused on Iowa's community colleges, but its authors point out that it reflects in general "the complexities that students face when trying to repay their federal loans." In the Iowa institutions, more than 1 in 4 of students who entered repayment between Oct. 1, 2010, and Sept. 30, 2011 — officially, the fiscal 2011 cohort — defaulted on their loans by January 2015. Almost half of those borrowers borrowed less than $5,000, and most borrowed under $10,000, the researchers found.
"Although community college students typically borrow less than students at colleges and universities in other sectors, community college borrowers frequently struggle to repay their loan debts," wrote Noah Brown, president of the association, in a foreword to the study.
What's going on? It's the demographics.
Overwhelmingly, the people borrowing the largest amounts are attending graduate school, often in preparation for lucrative careers in law, medicine or business. Some 86 percent of law school graduates in 2011-2012 had borrowed, and their average debt load was $104,400, according to the Department of Education, while 85 percent of graduates with medical degrees had borrowed an average of $126,500, and the 62 percent of MBAs who had borrowed took on an average of $43,200. These heavily indebted people may live on ramen noodles for a few years after graduation, but they are highly likely to be on track to soon earn more than enough to pay off their loans.
Just 17 percent of community college students borrowed in the 2011-12 school year, according to Department of Education data.
Community college students tend to be a rather different group. At an average age of 28, they are older than typical students at four-year colleges and universities, and about one-third are part of the first generation in their family to attend college. They are also more likely to attend part time: 59 percent do so, compared to 22 percent of students at public four-year colleges.
Older students are more likely to be working while attending college, and almost two-thirds of full-time community college students have jobs, as do 73 percent of part-time students. In addition, 17 percent are single parents. All of those attributes can make it much harder for community college students to complete a degree in a linear progression, leading to what Brown describes as community college students "swirling in and out of their institutions."
Perhaps most important, community college students' finances are more fragile. About one-third receive Pell Grants, federal awards reserved for low-income students. The relatively small size of their loans also indicates how tight their budgets are. And when these students stop going to college before completing their degrees, as many do, they are contending with their loans on income from jobs that probably pay far less than those for graduates.
Indeed, a report published in April by the Federal Reserve Bank of New York concluded that "borrowers from lower- and middle-income areas as well as borrowers who originated loans in their 30s are also at greater risk of default and delinquency."
Brown believes community colleges can do more to help their indebted students.
"You have to do way more than a one-time counseling service," he said, noting that a large share of defaulting students do not take steps to ease their problem like obtaining a loan deferment or forbearance. "There are many, many options, but what we are saying is students don't know what they are, and institutions need to step up and do a better job with students while they are in these institutions."
Default rates for the fiscal 2012 community college cohort declined to 19.1 percent from 20.6 percent the year before — though that remained stubbornly higher than the national average of 11.8 percent.
Brown remains concerned. "We are lending capital to students, many of whom are vulnerable for a lot of reasons and may not be able to repay those loans on the basis of the value of the education they get," he said.
"If you default, your financial life is ruined. You have to deal in cash for the rest of your life. It used to be death and taxes were the only certainty," Brown said. "You can throw in student loans now."