No degree, but debt

College graduation day

It's striking how well understood is the message that the way to get ahead in society is to get a college education--community college, junior college, a public four year university degree. Some form of postsecondary education is the entrance fee or certificate for applying for middle class jobs, the kind that comes with retirement and healthcare benefits. (A postsecondary degree is what philosophers call a necessary but not sufficient condition.)

For the first time in U.S.history, 30 percent of the 61 million Americans over 25 years old have at least a bachelor's degree, according to the Census Bureau. That's the good news.

The worry is how much debt students are taking on to get their degrees. Tess and Liz Weston, MSN's personal finance columnist, dealt with the difficulties of paying off a massive student loan debt last weekend.

The troubled student loan borrower is far from alone. From 2001 to 2009, the percentage of students who borrowed to finance college increased from 47 percent to 53 percent.  For most of these borrowers postsecondary education will pay off over time, especially once the economic expansion gains genuine upward momentum.

The same can't be said for the people who go to community college for a year, maybe attend university for two years, but never graduate. They don't get the degree. They don't get the job and career benefits of postsecondary education. They don't get the earnings boost from a college degree. They do get a student loan repayment book.

We met a number of people squeezed in this brutal pincer in the American RadioWorks documentary, Hard Times in Middletown: How the Middle Class Became the Brittle Class.  It’s a population highlighted in Degreeless in Debt: What Happens to Borrowers Who Drop Out by Mary Nguyen of Education Sector, a Washington D.C. think tank.

Among those who borrowed, the percentage of students who dropped out between 2003 and 2009 was larger than the percentage of students who dropped out between 1995 and 2001. Borrowers who dropped out were four times more likely to default on their loans. The trends are more particularly pronounced in the for-profit sector, which expanded greatly during the 2000s largely by recruiting and enrolling low-income students.  

People drop out for a number of reasons, usually job and family related. It isn't easy working and paying for school, especially if there aren’t family resources to draw on.

Higher education opens up opportunities for most people. The details of how that education is paid for matters. We don't want a situation where many students--mostly from low income families--end up with lots of debt and no degree. It's the educational equivalent of equivalent creating subprime mortgage neighborhoods.

About the author

Chris Farrell is the economics editor of Marketplace Money.

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