The Student Debt Crisis at State Community Colleges

Virginia community college student Wilis Rodriguez petitions the Legislature to make college affordable. More community college students are struggling with debt.

Community colleges charge lower tuition than just about anywhere else. They’re open to everyone. They offer the kind of technical training employers want. And they can serve as an affordable steppingstone to a four-year degree.

But while plenty of community college students graduate with a degree that leads to a better job, or to a four-year college, many community college students drop out. And a growing number of students are taking on debt they cannot repay.

States have focused more on reducing the debt students accumulate at four-year colleges than at community colleges. But some of the steps they’re taking could help community college students, as well.

The Student Debt Crisis at State Community Colleges

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Most Upper Darby financiPA payday loans states are now partly funding public colleges and universities based on whether students graduate on time. And some states are tackling community college costs by creating scholarships that eliminate tuition, as Obama has proposed.

In 2000, 15 percent of all first-time college students seeking degrees at a public two-year college borrowed. Twelve years later, 27 percent did. At Michigan’s Macomb Community College, where Obama spoke, just 6 percent of students take out federal loans. But of those students, who typically owe $5,170 at graduation, 18 percent default on their loans.

Working-class people poured into state community colleges and expensive for-profit trade schools when the economy soured. Although for-profit colleges tend to charge higher tuition, research shows that in recent years typical for-profit and two-year college borrowers have similarly high default rates.

Thirty-eight percent of two-year college students who started to repay their loans in 2009 defaulted within five years, as did 47 percent of for-profit college students, said a Looney, an economist at the Treasury Department. Just 10 percent of students who attended selective four-year colleges defaulted over the same period. The vast majority of two-year colleges are community colleges, the study noted.

Default rates are now falling, along with enrollment at community and for-profit colleges. But Looney’s study warns that many borrowers who attend the institutions will continue to struggle in the student loan market.

Not Just a Four-Year Problem

Many community college students start out with the odds against them. They tend to be older, live in poorer communities and have little family wealth to support them – 36 percent have family incomes of under $20,000, according to the Community College Research Center at Columbia University.

Still, community college students historically haven’t had to borrow to finance their education. Tuition usually runs a few thousand dollars a year – from $1,400 in California to $7,500 in Vermont. Low-income students who qualify for the maximum federal Pell Grant – $5,815 this year – usually find that their grant covers tuition.

Yet increasingly, community college students are borrowing. In Virginia, one of the few states to publish detailed student debt information, the share of community college students graduating with debt has more than doubled over the past decade.

In 2014-15, when community college tuition was $4,080, 37 percent of Virginia graduates who earned a two-year degree that prepared them to transfer to a four-year college had debt, up from 15 percent a ong graduates who earned a two-year occupational degree, 41 percent had debt.

(Virginia’s community college system says the state debt figures are too high, but that may be because the state is calculating debt differently. The state looks at debt owed at the point of graduation, which may include debt from other institutions.)

They’re borrowing for things just beyond the cost of tuition and fees. They’re borrowing to live, said Tod Massa, who oversees the state’s postsecondary education data.