There is a Correlation Between Higher Student Loan Debt and Higher College Completion Rates

Posted By Terri Williams on September 14, 2015 at 11:38 am
There is a Correlation Between Higher Student Loan Debt and Higher College Completion Rates

According to a new study from the Center for American Progress (CAP), students with the highest levels of student loan debt also are more likely to obtain at least one degree. For example, CAP notes that the District of Columbia is the “student debt capital of America.” The average student loan debt in the nation’s capital is $41,000 – which is $10,000 higher than the average student loan debt in any other state. However, the District of Columbia is also the place where most residents have at least an associate degree. And one out of every 12 D.C. residents is a lawyer.

Virginia has the 4th highest average debt per student – $28,467 – but 41% of residents there have at least an associate degree. Maryland, Virginia, Florida, and Colorado are other states with high levels of student debt as well as high numbers of college graduates.

On the other hand, in Louisiana, the average debt load is $26,250 – close to the national average.However, only 26% of adults have at least an associate degree, making it the state with the second highest debt per graduate. Mississippi, Ohio, Indiana, and Arkansas also have low levels of student debt as well as low numbers of college graduates.

Overall default and repayment rates

A survey by the National Center for Education Statistics (NCES) lists student loan default rates by degree attainment:

DefaultRate Degree
1.1% Bachelor’s degree
2.4% Associate degree
24.7% Certificate
8.9% Still enrolled
69.2% No degree


College graduates are significantly less likely to default on student loans than those who do not attain a degree. In fact, an NCES survey of beginning post-secondary students shows the loan status of graduates with a bachelor’s degree as follows:

Percentage of Students Student Loan Status
64.1% In repayment
17.1% Not in repayment
9.5% Defer/forbearance
9.0% Paid off/cancelled
0.2% In default


The larger problem appears to be students who incur student loan debt but do not graduate from college.

Ben Miller, the author of the CAP study, says it is preferably to have a bachelor’s degree and owe $28,400 as opposed to dropping out and owing $10,000. Presumably, the college graduate has higher earning potential – according to a Georgetown University study, over the course of a lifetime, the average employee with a bachelor’s degree earns $1 million more than someone with a high school diploma.

Good debt vs. bad debt

If student loan debt from college graduates is considered “good debt,” then indebtedness that does not result in a degree would be considered “bad debt.” At last count, 7 million borrowers have defaulted on $99 billion in federal student loans.

The key, then, is to address the issues that cause students to discontinue their education. Some people have no intention of attending college, but then find limited career options available without a degree – often as a result of  “upcredentialing,” – and attend school out of desperation. However, they find themselves ill-prepared for the rigorous requirements of university-level coursework. Other students may be forced to leave school because of family and/or work obligations.

And it must be noted that not all college graduates face a secure employment future. Some graduatess major in fields that are not in high demand or don’t pay enough to justify the cost of the degree. Other students may have attended schools that did not equip them with the skills and credentials needed to obtain gainful employment in their desired area. Many for-profit schools have recently come under scrutiny because their students have higher-than-average debt loads and lower-than-average employment rates.

One thing is clear from each of the studies: on the subject of student loans, graduates fare much better than those who did not complete college. With that in mind, increasing completion rates at programs that provide legitimate credentials should be a priority among students and schools.

Terri Williams
Terri Williams graduated with a B.A. in English from the University of Alabama at Birmingham. Her education, career, and business articles have been featured on Yahoo! Education, U.S. News & World Report, The Houston Chronicle, and in the print edition of USA Today Special Edition. Terri is also a contributing author to "A Practical Guide to Digital Journalism Ethics," a book published by the Center for Digital Ethics and Policy at Loyola University Chicago.

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