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Americans now owe more than $1.5 trillion in student loan debt. But not all debt is created equal. Among the 45 million Americans who hold that debt, some are well-positioned to pay off their student loans and some are not. NPR's Elissa Nadworny reports on what makes the difference.
ELISSA NADWORNY, BYLINE: So who are these borrowers?
TIFFANY JONES: Most students (laughter). So that's the easy answer in this.
NADWORNY: Tiffany Jones is director of higher ed policy at The Education Trust, a nonprofit advocacy group. And she's quick to point out, yeah, lots of students borrow. According to the federal government, more than 60% of college students use federal loans to help them pay.
JONES: It's unaffordable for students to attend college, and they are attending anyway because it's important in terms of getting a job, and they're having to borrow in order to attend.
NADWORNY: But as candidates talk about debt forgiveness, it's important to note that, for some of these people, the loans did their job - they allowed folks to go to college, to get their degrees, to land a better job - and so now they're able to pay back those loans. Here's economist Susan Dynarski from the University of Michigan.
SUSAN DYNARSKI: Would people rather have no debt at all? Yes, that's true - everybody. Who is having a hard time with the debt? It's a fairly narrow slice of the population, and it is not the people who went to grad school, and it's not the people who graduated with their BAs.
NADWORNY: They often get better jobs and can pay off their loans. It's the folks that have smaller loans and no degree that we need to be worried about.
DYNARSKI: The typical borrower that's having a hard time has a loan under $10,000.
BEN MILLER: Probably the single biggest mistake I see people make is the assumption that high levels of debt automatically correlate with struggle.
NADWORNY: That's Ben Miller from the left-leaning Center for American Progress. He's studied default rates. Default - that's what it's called when you don't pay back your student loans.
MILLER: It is not the only sign of struggle, but it's the worst sign of struggle.
NADWORNY: When you're in default, the government can take your tax refund or part of your paycheck. They can even take your Social Security when you get older. Every year, about a million student borrowers default, and they give us a clear sense of who is really struggling. Tiffany Jones from Ed Trust says those people are typically...
JONES: Students who start college but do not complete, low-income students and black students in particular.
NADWORNY: According to federal data, half of African American borrowers who took out loans for the 2003-2004 school year defaulted after 12 years. Some factors for why black students have a higher burden - they're more likely to borrow money in the first place; they often have less generational wealth; they're more likely to attend for-profit schools; and they often earn less money in the workplace. Even black borrowers who graduated with a bachelor's degree, they're still defaulting at a rate about four times higher than their white counterparts.
MILLER: In other words, the bachelor's degree can't completely wipe away issues related to race.
NADWORNY: Students who receive a Pell Grant - that's free money for low-income students - are also more likely to default. Dynarski, the economist in Michigan, explains it this way - if you're a low-income student and you take out loans but drop out so you don't get that degree, you probably aren't going to get a wage bump to help you pay back those loans.
DYNARSKI: If you look at the likelihood that somebody is going to default, it actually drops as debt goes up. Now, that sounds completely counterintuitive, and that's because the missing factor here is earnings. You can't pay off a debt if you don't have any money.
NADWORNY: Another group of people who are really struggling with student loans - those who went to for-profit colleges.
DYNARSKI: The for-profits have very high default rates, very high dropout rates.
NADWORNY: For-profits serve about 10% of students but are overrepresented in the default data. Because for-profit students are likely to borrow more money, they're four times more likely to default on their loans than community college students. And here's one more thing to consider amid this talk about debt forgiveness and student loans - if the government wipes out that $1.6 trillion, the following year, there will still be millions of new students headed to college who will need to borrow money to pay for it.
Elissa Nadworny, NPR News.
[POST-BROADCAST CLARIFICATION: In this story we say that when you're in default, and you get older, you can lose your Social Security. In fact, the federal government can take part, not all, of your monthly Social Security benefits. ]
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