EPI's weekly illustration of education data trends — November 21, 2016

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Graduation and Default Rates at Four-Year Institutions,

by State, 2014-15

 

Today's chart shows two important pieces of information. First is the four-year graduation rates of students attending four-year institutions in each state. The second is the cohort default rate of students with federal student loans, also by state.

Readers can make what they want from the findings. Obviously, Some states do very well in graduation rates. Some of these data may be biased by selectivity of institution, such as the District of Columbia, which has students from Georgetown University, George Washington University, Catholic University, and American University, among others. This bias extends to the Northeast, which houses most of the private, four-year non-profit universities in the US, and which are the most selective institutions. And while not a perfect correlation, many of the states with lower-graduation rates come from the South, and especially the South Atlantic, which are the least selective institutions.

Cohort Default Rates (CDR) are the three-year calculated rates of federal loan borrowers who have defaults on their loans within three years of entering repayment, which begins six-months after leaving higher education. The correlation of states by graduation rates and default rates is 0.67, a relatively strong inverse correlation suggesting that states with relatively low graduation rates have higher cohort default rates. And this makes perfect sense, because students who are most likely to default on their loan did not graduate with a degree, thus potentially reducing their earning power and repayment opportunities.

The moral of this story is simple: four-year institutions that graduate a small percentage of their students within a six-year period are troublesome for society and the individual. Society has to bear the subsidy cost of sending these students to college and possibly future safety net payments to the defaulters, and the individuals are hammered with the reality that they have to pay their student loans, enter bankrupcy, and earn a living without a degree.

For public policy, it is time to do something significant about graduation rates in four-year institutions. In this day and age, there should be no university system with a sub-50 percent graduation rate. Those institutions should be either eliminated or restructured.