India’s path to prosperity: Book talk with Raghuram Rajan on ‘Breaking the Mold’


India’s path to prosperity: Book talk with Raghuram Rajan on ‘Breaking the Mold’


Different degrees of debt: Student borrowing in the for-profit, nonprofit, and public sectors

Over the past ten years, the volume of outstanding college student loan debt has tripled, reaching more than $1 trillion and raising concerns for both students and policymakers. At the same time, enrollments in for-profit colleges spiked, rising from about 650,000 in 2000 to close to 2.5 million in 2010. Although increased scrutiny and regulation of the for-profit sector has contributed to declining enrollment in more recent years, concerns remain over the high debt burdens and default rates of for-profit students.

In this brief, Stephanie Riegg Cellini and Rajeev Darolia analyze patterns of student borrowing across for-profit, nonprofit, and public college sectors. In particular, they investigate the connection between debt and educational costs and student backgrounds. How is student debt distributed across sectors, and what factors account for the unusual borrowing trends among students of for-profit colleges?

Their research found that for-profit students are similar to community college students in demographics and financial resources, yet pay costs similar to private nonprofit students. Furthermore, for-profit student have less institutional aid to cushion tuition costs and school fees. As a result, they face the highest borrowing rates of any sector for comparatively weaker job prospects post-graduation. Cellini and Darolia found that tuition costs most strongly influence the borrowing trends of for-profit students. Surprisingly, factors such as student demographics and financial resources do little to explain their borrowing habits. The researchers speculate the primary reason for the greater borrowing among for-profit students is a lack of access to accurate information about the costs associated with for-profit schools. This problem could be at least partly to blame on the institutions themselves, which may encourage students to borrow due to their profit-seeking business models.

Recent efforts to provide students with greater information about their options are a good first step, but ultimately, the authors write, “more work is needed to understand how to deliver such information, who accesses the data, and whether more intensive supports are needed for some students.”