Key Finding 1: Before Borrowers Entered Default, They Did Not Receive the Benefits Promised by Higher Education

Focus group participants reported going to schools that provided little support, often leaving without a degree or credential, and not being able to find stable employment, which contributed to their financial insecurity. But even among those who graduated and reported other benefits from a degree—such as the ability to have more control over work schedules and an expanded professional network—almost no one felt like their degrees or higher education experiences, especially given debt that they took on to get there, ultimately paid off.

Many participants did not receive a degree or credential

Those who do not complete a program of study are more likely to default on their loans, and many focus group participants reported leaving school without a degree or credential.¹ While borrowers who do not graduate tend to hold relatively small amounts of debt—often less than $10,000—due to shorter periods spent in school, even smaller debt loads can be difficult to manage without the financial returns that can come from a college degree.²

Focus group participants also explained how their small balances grew and became more of a burden as interest accrued when they fell behind on their loans. One participant said that he had taken out “$5,000 or $10,000…30 years ago and I'm still paying on that…I know [my debt] is not astronomical, but I didn't get the degree out of it either.”

Focus group attendees noted that obstacles outside of their control prevented them from graduating. For example, many participants fell ill during college, struggled with a chronic illness, or had to drop out to care for a sick family member. One participant “went to school…over about a period of about 15 years or so” since he had to “keep dropping out and taking breaks…due to health issues.” Several of these borrowers were frustrated that their schools were not more accommodating, and others mentioned being frustrated by difficulties transferring credits and completing remedial classes.

Some borrowers cycled in and out of school for years, accruing debt along the way but never graduating. A number eventually hit limits on the amount of federal loans they could borrow or they defaulted on their existing student loans, preventing them from borrowing more to complete their degree.³ “It's the constant circle of couldn't finish, still have to pay back the loan,” said one borrower. “You need to go back to school to get a skill [but you] can't go back to school because you can't afford it and can't get a loan because you have this one.”

A sizable portion attended schools that did not pay off for them

While defaults are not limited to students in one sector, research indicates that a large portion of those who attended for-profit schools—roughly half—default on their loans.⁴ A Brookings analysis found that for-profit enrollees are 10 percentage points more likely to default, even after accounting for student characteristics and background.⁵

Multiple participants reported going to for-profit schools that closed or lost accreditation, which made it difficult to transfer credits elsewhere. While participants often questioned the value of their education, they were only sometimes aware that their schools misrepresented educational opportunities, the quality of their programs, and job placement rates. One borrower reported going to ITT Technical Institute, a for-profit college that ceased operations in 2016 amid evidence that it misled and defrauded students.⁶ He said, “I'm regretful that I took the loans, because I went to ITT and that school closed…it was a joke…I got straight A's in one semester, and I didn't even turn in the workbook of the assignments at the end of the year.”

Some participants experienced a compounding of setbacks, and they did not complete low-quality programs. One participant reported feeling “robbed” and not having anything to show for the debt he accumulated at a school that lost its accreditation. He noted that he had “spent the better part of 10 years working to get the experience that I would've gotten” if he had been able to complete a program at an accredited school.

Even some borrowers who got bachelor’s and graduate degrees defaulted

Those who complete bachelor’s degrees and attend graduate school are often left out of critical conversations about student loan repayment because they make up a small portion of those who default. But in the focus groups, borrowers indicated that the higher levels of student debt that come with such degrees—in all sectors of higher education—could be devastating when they did not see the income growth they expected.

While these focus groups do not allow disaggregation of the findings by race, research indicates that student of color, and particularly Black students, are more likely to have fewer resources to pay for college, attend historically underfunded institutions, be targeted by and enroll in for-profit schools, have student debt and borrow more, and see their student loan balances grow after leaving school than white students and borrowers.⁷ For some of these borrowers, even earning a college degree is not necessarily protective against default: Black graduates with bachelor's degrees default at higher rates than white students who do not complete a credential.⁸

Discrimination and credentialization in the job market also mean that women and students of color often need more education to earn amounts similar to their male and white peers.⁹ Many focus group participants described feeling like they kept losing out in a race for degrees and credentials. One noted that “you get a degree and it's not worth what you think it is…so now you're having to go back to school again, to get another degree on top…. You're in a constant quicksand of just reaching for something higher.”