Research & Commentary: Student Loan Default Rates at Iowa Community Colleges

Published October 17, 2015

Many young adults who do not have much interest in going to college, or lack the aptitude for it, are being shoehorned into postsecondary schools. Most go because they have been told their entire lives the only way to get ahead is with a college degree. Very few of these students know any other options for professional training, advancement, or accreditation are available to them.

A new report authored by Colleen Campbell and Nicholas Hillman, Ph.D., for the Association of Community College Trustees (ACCT) sheds light on the deleterious effects the push to increase college enrollment is having on community college students. Campbell and Hillman followed all 27,675 Iowa community college student loan borrowers who make up the fiscal year 2011 repayment cohort, and their numbers are troubling.

The authors found only 31.1 percent of student loan borrowers left an Iowa community college with a degree, diploma, or certificate. Nearly 36 percent of all borrowers who left their community college without a credential ended up defaulting on their loans, and 90 percent of all student-loan defaulters left with no credentials, with 59.5 percent of defaulters earning fewer than 15 credit hours and 26.1 percent of defaulters never earning even a single credit. A little more than 43 percent of these Iowa defaulters carry debt burdens of fewer than $5,000.

As these numbers make clear, the presumably well-intentioned push to increase college enrollment by flooding marginal and peripheral students with thousands of dollars to pursue subjects and degrees in which they have only a minor interest is counterproductive. This naïve pursuit has led to millions beginning their adult lives in a precarious financial situation.

The detrimental effects caused by the widespread belief a bachelor’s degree should be the baseline for all high school graduates has by no means been limited to Iowa. A nationwide online survey of 30,000 college graduates prepared by Gallup and Purdue University found only half the respondents strongly agreed their education was worth the cost. For those who graduated between 2006 and 2015, the years roughly coinciding with the housing market collapse, the Great Recession, and the ensuing anemic recovery, only 38 percent agreed college was worth it. Even worse, 36 percent have put off purchasing a home, 33 percent have delayed purchasing a car, and 19 percent have refrained from opening a business because of the weight of their college debts.

Instead of forcing students into a one-size-fits-all, cookie-cutter career preparation track, states should offer more ways for young people to advance their skill sets and earning potential. Post-secondary education vouchers, for example, could provide an incentive for students to attend nontraditional schools or trade schools, instead of going to a traditional four-year college. Spending a year or two in an apprenticeship program learning welding or pipefitting will most certainly pay off in the long run for many whose eyes glaze over in a sociology or philosophy class. They would be less likely to incur onerous debts, they would benefit from programs better suited to their interests and abilities, and many would be able to start earning significant salaries much more quickly.

An important problem affecting higher education is students are forced to spend increasing sums of money on higher education while the value of that education continues to decline. Encouraging those young adults who are not prepared for college, and who are only marginally interested in obtaining a college education, to enter nontraditional schools or apprentice programs would divert many students from unnecessarily entering traditional colleges, where they often incur significant amounts of debt. It would also encourage educators and administrators at institutions of higher learning to provide a better education at a more reasonable cost.

The following documents provide information about student loans and postsecondary education reform.

Rethinking Higher Education Regulation for an Unbundled World
The American Enterprise Institute reports on how government regulations hamper competitors trying to offer “unbundled” options for those seeking nontraditional postsecondary education.

Beyond Retrofitting: Innovation in Higher Education
Education researchers for the Hudson Institute write that in markets where new entry is controlled and established institutions are subsidized, there is a temptation to simply graft technology onto existing routines while leaving cost structures intact. Such retrofitting may be better than nothing – and it may look like transformation to optimistic observers, story-seeking journalists, and fretful academics – but it often amounts to little more than repackaging a largely familiar product at a familiar price.

Taking Charge: A State-Level Agenda for Higher Education Reform
The American Enterprise Institute lists four areas in which state leaders can take charge in implementing higher education reform: creating incentives for schools to improve student success by becoming more productive and experimenting with new approaches; rewarding cost effectiveness; improving transparency; and encouraging innovation.

Twenty-two Percent of Federal Student Loans are in Default or Delayed Default
In this Heartlander article, Matt Faherty reports only 40 percent of individuals with direct federal student loans are currently repaying their debt, according to the Consumer Financial Protection Bureau.

Student Debt Puts Millions Into Ranks of Lost Generation
In this Heartlander article, Robert Romano reports on a study by the New York Federal Reserve that found 11.2 percent of 39 million borrowers with student loans are more than 90 days delinquent on payments on the nation’s $986 billion of student loan debt.

The Real Source of Soaring College Debt? Government
In this article published in School Reform News, a publication of The Heartland Institute, Ashley Bateman reports on a 2012 study by the Consumer Financial Protection Bureau and U.S. Department of Education, which shows easily available government funds offered to finance students’ college costs are fueling tuition increases and unnecessary expenditures.

The Subprime College Crisis
Since 2000, U.S. taxpayers have spent $300 billion on Pell grants, with no way of knowing how many of the recipients actually earned degrees, according to a Heartlander report by Heartland Research Fellow Joy Pullmann.


Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this and other topics, visit the School Reform News website at, The Heartland Institute’s website at, and PolicyBot, Heartland’s free online research database, at

The Heartland Institute can send an expert to your state to testify or brief your caucus; host an event in your state; or send you further information on a topic. Please don’t hesitate to contact us if we can be of assistance! If you have any questions or comments, contact Logan Pike, Heartland’s state government relations manager, at [email protected] or 312/377-4000.