More and more students use loans to cover the cost of college today, including 17 percent of community college students. In Protecting Colleges and Students: Community College Strategies to Prevent Default, Bryce McKibben of ACCT and Debbie Cochrane and Matthew LaRocque of TICAS address issues that may arise in the repayment phase of student loans after a student leaves their institution. The report specifically focuses on Cohort Default Rates (CDR), which refers to the percentage of borrowers at a particular institution who default on their loans within three years of leaving the institution. The CDR has serious implications for colleges: if it rises too high, institutions may lose their eligibility to participate in federal student aid programs. The authors analyzed the financial aid and student support practices and default rate data from nine community colleges across the country and offered institutional and policy recommendations to improve default rates and intervene to support students at-risk of default. 

In order for colleges to reduce their CDR, they need to know which students are most at risk of default. The analysis in this report indicates a few key points for college leaders to remember when targeting support to borrowers. Firstly, borrowers who completed their programs were considerably less likely to default than peers who did not complete. Only 9 percent of student borrowers who completed their program ended up defaulting on their loans. However, 27 percent of students who left their institution without completing their program defaulted. Specifically, students who had earned at least fifteen credits were less likely to default than those who had not reached this milestone. 

This analysis also looked at default rates of other groups of students: Pell recipients, students who took remedial classes, and dependent and independent students. While college completers defaulted less often than completers at all institutions, the default rates of students in these three groups were less uniform. There was a wide range of default rates of, for example, Pell recipients at institutions in this report. That tells college leaders that while broad patterns in default rates provide important context, it’s also important to analyze institutional data to understand trends specific to their college and target support accordingly. 

Knowing the negative impact default can have on individual students and institutions, what can be done to reduce default rates? The report suggests reaching out to students with supplemental information when they borrow as well as after they leave the institution with information about repayment options and expectations could also help students avoid default. Colleges are also encouraged to analyze institutional financial aid data to identify student populations particularly vulnerable to default and provide additional support. 

Efforts to reduce default can benefit from the collaboration of a variety of campus stakeholders, including financial aid administrators, student support services, institutional research offices, and others. While colleges can do much to offer guidance and support to borrowers, the report also offers several recommendations to policymakers. Namely, the authors recommend that borrowers heading toward default be enrolled in income-based repayment, which may provide lower payments and reduce default risk and that borrowers have access to one online portal for loan management to reduce the confusion that arise from the currently complicated loan servicing system. Both student borrowers and colleges stand to benefit from implementing effective strategies to reduce student loan default, and Protecting Colleges and Students offers tools and recommendations to equip policymakers and institutional leaders as they work to support today’s students.