Oakland, CA – A college degree or credential is a crucial stepping-stone to the middle class, and American colleges and universities play an essential role in building a more prosperous, equitable country. However, too many colleges routinely and disproportionately enroll students who end up struggling to repay or, worse, default on their student debt. More than one in four borrowers eventually default on their loans after college, and inequities throughout the education pipeline and systemic racism and its resulting wealth gaps hit Black students especially hard, with half of Black borrowers defaulting on their student loans within 12 years.
Holding colleges accountable can improve loan outcomes, as the Cohort Default Rate (CDR) and Gainful Employment rule have both done. New student debt affordability measures are needed to incentivize colleges to improve further and create clearer choices for students. Policymakers need to be able to better identify unaffordable debts to more effectively address overly burdensome student loan debt and its inequitable impacts.
A Policymaker’s Guide to Using New Student Debt Metrics to Strengthen Higher Education Accountability, a new report from The Institute for College Access & Success (TICAS), considers three promising debt metrics that could complement and strengthen existing accountability metrics and ultimately move the needle on borrower success: debt-to-discretionary earnings ratios, earnings net of expected debt payments thresholds, and repayment rates.
“College is supposed to lift people up, but too often student debt and harmful outcomes push them down,” said Oliver Schak, TICAS research director and an author of the report. “The COVID-19 pandemic makes it even more urgent that we protect millions of students from severe, long-term struggles with student debt. New metrics to measure who is left worse off by their debts is an essential first step to addressing this crisis.”
The CDR is the federal government’s most longstanding, successful student debt outcome measure; it tracks the share of borrowers who default within a specific time after entering repayment. However, the convergence of several factors, including the temporary elimination of student loan default due to the federal student loan payment pause, underscores the need for policymakers to think more broadly about college accountability. This includes strengthening the default rate as well as supplementing it with additional, complementary metrics.
The new report from TICAS provides a comprehensive overview of the existing student debt metrics landscape and body of research and makes recommendations to policymakers on how to develop and implement additional metrics to protect students from adverse debt outcomes.