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The default-dropout connection

University Business, September 2013

When the Debt Reduction Task Force at The University of Texas System was gathering data for a report released last December, one of the most surprising findings for chairman Scott Kelley was the strong correlation between students who default and those who don’t complete their degrees.

The report cites research by Mary Nguyen, then with the independent think tank Education Sector, showing that more than 80 percent of defaulters did not finish their degrees and that students who leave school before graduating are four times more likely than those with diplomas to default on their loans.

“If you don’t complete and you are in debt, you are much more likely not to be able to repay that debt and to be burdened with it throughout your life,” Kelley says. Patricia Thompson, a financial aid administrator with the State University of New York System, says leaders there decided to look beyond the traditional response to troublesome default rates.

“Historically, if a president got notice of the cohort default rate for the campus, he would immediately send it to the financial aid office,” Thompson says. “Well, as we know, unfortunately if somebody gets into default, they are no longer at campus. ... We saw a need to change the perception, because the research showed us there were a lot of factors that impact whether or not a student is likely to go into default. We realized pretty quickly that it was not a financial aid problem—it was a campuswide problem.”

Because of that realization, Thompson says, the support network for SUNY student borrowers now includes people in admissions, enrollment management, academic affairs, and residence life.

“Once we’ve recruited a student, we want them to be successful,” Thompson says. “We want them to stay and complete the credential that they came to earn.” There’s also another business interest in reducing failure to complete: “Keeping students on campus means that we don’t have to worry about anybody leaving an outstanding balance,” Thompson says.