More than 440 colleges in the United States have student loan nonpayment rates above 40 percent, with many for-profit institutions facing significant challenges, according to an Investopedia analysis of federal student aid data. This trend highlights a growing issue where students accumulate debt without being able to repay it, as the Department of Education moves to resume payments after disruptions caused by the pandemic.
Michael Ryan, a finance expert and founder of MichaelRyanMoney.com, pointed out that the true cost of college lies not just in tuition, but in the debt versus what the education actually helps you earn.
Why It Matters
Student loan delinquency has become a significant concern following the return of federal collections and the end of credit reporting protections. Falling behind on payments can heavily damage borrowers’ credit scores and potentially lead to wage garnishment.
Repayment outcomes vary greatly by institution. A high nonpayment rate suggests that graduates may not earn enough to manage their debt or that the economic benefits they expected from their education aren’t realized.
What To Know
The Investopedia report analyzed federal student loan borrowers who entered repayment since January 2020 and were delinquent for more than 90 days. The Department of Education groups borrowers by college, allowing for comparison of repayment outcomes.
Florida Career College had the highest nonpayment rate among institutions with at least 5,000 borrowers. Approximately 61 percent of its 28,000 borrowers were over 90 days late on their payments.
Financial literacy instructor Alex Beene noted the struggle for students at many for-profit colleges, which contributes to a difficult reputation for these institutions, as they often fail to meet the financial needs of their students.
Other schools with high nonpayment rates included:
- UEI College-Fresno (California): 56%
- United Education Institute-Huntington Park (California): 54%
- Tulsa Welding School (Oklahoma): 54%
- UEI College-Gardena (California): 54%
- All-State Career (Maryland): 54%
- Vista College (Texas): 51%
- Miller-Motte College (Tennessee): 50%
- Southern Careers Institute (Texas): 50%
- New England Tractor Trailer Training School of Connecticut: 49%
Investopedia also identified nearly 1,200 colleges where nonpayment rates exceeded 30 percent.
Beene commented that inflationary pressures are making student loan repayments more challenging, with potential consequences for higher education.
Why Are For-Profit Schools Overrepresented?
For-profit colleges frequently appear near the top of nonpayment rate rankings. These institutions tend to have students who borrow more and default more often than those at similar public colleges. Some for-profit institutions that are defunct or never accredited leave students with significant debt and degrees that may not carry economic value.
A study by the Federal Reserve Bank of New York indicated that enrollment at for-profit institutions leads to increased borrowing, more significant default risk, and poorer labor-market outcomes compared to public-school attendees. Recent changes to Department of Education policies have increased uncertainty for borrowers, impacting their ability to understand loan forgiveness options.
Kevin Thompson, CEO of 9i Capital Group, stressed the difficulty for students navigating a complicated loan system amid court injunctions and regulatory changes.
What Happens Next
The Trump administration focused on school accountability related to student outcomes, and continued scrutiny of institutions with poor repayment records is likely.
Repayment data is a critical measure of a school’s long-term value for future students. High nonpayment rates may indicate challenges in converting education into financial security.
Thompson predicted that individuals saddled with debt could face lower credit scores, increased difficulty accessing capital, and a range of social consequences such as delayed family formation and homeownership.
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