new analysis of student loan borrowers shows that, contrary to public perception, those who borrow the least are most likely to default on their loans.
The study, which examined borrowing by community college students in Iowa, found that 31% of those with loan balances of less than $5,000 defaulted, compared with 22% of those who owed between $10,000 and $15,000. The national average default rate across all educational institutions is less than 14%.The study adds credence to a changing understanding of the $1 trillion student debt crisis, suggesting that the riskiest borrowers are not those who have taken out tens of thousands of dollars in loans to cover high tuition costs, but those who borrow in small amounts.
So far there has been little effort by the federal government to help such borrowers, according to the study, released Monday by the Association of Community College Trustees. But that could change: the Obama administration has recently made free community college a key part of its education agenda, proposing a national program and pushing states to adopt their own initiatives.