An article on the Quartz news site about the resignation of Seth Frotman as student loan ombudsman from the federal Consumer Financial Protection Bureau (CFPB) cites research by TC's Judith Scott-Clayton for the Brookings Institution. In a report published last January, Scott-Clayton wrote that "the looming student loan default rise is worse than we thought."

Judith Scott-Clayton
Judith Scott-Clayton, Associate Professor of Economics and Education

In her analysis of data on student debt and repayment from the U.S. Department of Education, Scott-Clayton found that:

  • Default trends suggest that "nearly 40 percent of borrowers may default on their student loans by 2023."
  • Debt and default among black college students is at crisis levels. Black BA graduates default at five times the rate of white BA graduates (21 versus 4 percent), and are more likely to default than white dropouts. Borrowers for for-profit colleges default at twice the rate of borrowers for two-year institutions. But because for-profit students are more likely to borrow, the default rate among all for-profit entrants is nearly four times that of public two-year entrants.
  • Default rates depend more on student and institutional factors than on average levels of debt. For example, only 4 percent of white graduates who never attended a for-profit defaulted within 12 years of entry, compared to 67 percent of black dropouts who ever attended a for-profit. Defaults are highest among those who borrow relatively small amounts.
  • Trends over time are most alarming among for-profit colleges; out of 100 students who ever attended a for-profit, 23 defaulted within 12 years of starting college in the 1996 cohort compared to 43 in the 2004 cohort, (compared to an increase from just 8 to 11 students among entrants who never attended a for-profit institution).