Student loan debt typically increases when a student drops out.

According to a recent report, student loan debt for over 1 million college dropouts has increased by almost $1 billion in recent years.

The report reveals that the amount of debt individuals accumulate if they do not complete college has grown. This sheds light on how college completion rates contribute to America’s student loan crisis, especially as the Biden administration considers factors for new forms of debt relief.

According to the report, students who took out loans between 2013 and 2015 but did not graduate collectively owed $918 million more than their initial borrowed amount, after four years of loan repayment.

In contrast, the situation for college graduates is significantly different. Students who took out loans during the same period and completed their degrees collectively owed $3.2 billion less compared to their initial borrowing.

The Higher Education Advisory Group, a research and consulting firm, published these findings. The National Association of Student Financial Aid Administrators commissioned the study, which utilized federal databases to compile data on millions of student loan borrowers from almost 2,000 colleges and universities.

The report underscores the importance of finishing college in order to effectively repay student loans, as emphasized by Michael Itzkowitz, the report’s author and a former Education Department official.

“The bottom line is the student debt crisis is getting out of control,” said Itzkowitz. “One of the main culprits is students who don’t complete their college degree.” 

Warnings about for-profit colleges, according to data

The study also focuses on an essential aspect of the student loan debate: earning potential. It looks into how much money college students can expect to earn after graduation and securing a job.

While colleges generally do not make explicit promises about graduates’ future earning potential, certain schools are more deceptive in this aspect than others.

The risks associated with paying a significant amount for a college degree vary based on the institution. Both public and private institutions show that dropping out results in students having more debt than they initially took on. On the other hand, graduating helps students make progress towards reducing their debt.

However, there is an exception to this trend: for-profit colleges. Regardless of whether students complete their degrees, graduates from these colleges experience an almost equivalent increase in their student loan debt.

The Education Department is currently engaged in discussions about implementing more regulations on for-profit schools. These discussions are set to continue until March.