Student Debt Proposal #3: Facilitating on-time graduation

Policies that improve on-time graduation rates outlined here will substantially reduce lifetime student debt burdens.


Most of the focus of the discussion on student debt burdens is on proposals to make college debt free and proposals to forgive student debt.  The previous work on student debt published by this blog looked at the possibility of eliminating student debt for first-year students and potential modifications to student loan contracts that would offer limited debt relief. 

The discussion in this post examines whether student debt burdens could be improved through improvements in on-time graduation rates.

This CNBC article states that only around 41 percent of undergraduate students graduate within four years and 59 percent of undergraduate students graduate within six years.  On-time graduation rates are lower for people who start college at a community college and then transfer to a four-year institution.   

People who graduate on time tend to borrow less because of annual limits on student debt.

  • A dependent undergraduate student graduating in four years can take out a maximum of $27,000 in Stafford loans.  
  • The maximum Stafford student debt for dependent undergraduates is $31,000.
  • The overall Stafford debt limit for independent students is $57,500.  People who take longer to graduate are more likely to become independent students and qualify for the higher limit.
  • People who spend a longer amount of time in school may be more likely to take out a private student loan.

A couple of years ago I examined data from NCES on the relationship between amount of time it took for undergraduate to graduate and student debt outcomes for students graduating in 2012. 

  • 73.3 percent of students taking five or more years to graduate incurred debt compared to 62.6% for students who graduated in four or fewer years.
  • Average student debt for students with debt was $31,639 for students taking five or more years to graduate compared to $25,528 for students taking four or fewer years.

These figures understate the impact of duration in school on debt totals because everyone in the sample graduated and the debt totals do not include private loans or PLUS loans.

Improving on-time graduation rates:

Three policy levers designed to improve on-time graduation rates are considered.  The first set of policies involves programs attempting to better prepare students for college.  The second set of policies involves programs and rules impacting students in college.  The third set of policies involves attempts to mitigate the impact of unanticipated events and circumstances, including economic hardships and sexual assault.

Improving preparedness of students prior to college:

Some students are better prepared to succeed in college and graduate on time. The need for remedial courses often increases the amount of time spent in school and the total debt incurred.  

Costs associated with remedial education are not exclusively incurred by low-income or community college students.  One study reveals 45 percent of student taking remedial college work are from middle-income or upper income households and that nearly half are enrolled in four-year public or private colleges.

Several programs are proposed to better prepare students for college including:

  • Efforts to improve early education outcomes: Go here for a study on the importance of early education programs.
  • Efforts to increase access to AP courses and improve AP scores.  The programs discussed heretarget communities with low AP participation rates and attempt to improve both access and performance.
  • Increased access to community college courses while still in high school: The California Dual Enrollment program is an example of a program that allows high school student obtain college credit in high school.
  • Increased early access to camps and courses related to computer programming and coding:  It would be useful to survey people obtaining a CS or STEM degree to more fully evaluate the impact of early access to CS and success in the field.

Polices adopted by colleges:   

Colleges differ substantially in their on-time graduation rate.  Part of the difference is explained competitiveness of the college. Part of the difference is explained by college-specific policies, starting with transparency about on-time graduation rate and other performance metrics.

  • Greater transparency on on-time graduation rates for the university by area of study:  Some information on on-time graduation rates, debt totals, and starting income for universities can be obtained from the College Scorecard.  It would be useful to have more information for schools and for different departments in schools along with an overall rating.   
  • Better monitoring and Increased incentives for students to maintain on-track for on-time graduation:  Some students often enroll in fewer than the 15 credits per semester needed to graduate on time. Go here for a Cal-State article on why students should take 15 hours per semester. A policy requiring students who are behind schedule complete some on-line or summer course work before receipt of additional student loans might be useful.
  • Standardizing AP credit policies:  Some schools and some departments do not give credit for students who pass some AP exams.  Any student who gets a 4 or above on an AP test should get some credit if the institutions is processing federal student loans. The academic issues created by this change could be mitigated by having the department create a new course that overlaps but builds on the AP course. 
  • Reduce loss of credit by transfer students:  This article points out that student lose around 40 percent of their credits by transferring and argues for the acceptance of more transfer credits.  It would also be useful for students to transfer earlier in their career when fewer credits are at stake.
  • Increase access to courses for people needing certain credits for graduation or completion of a major:  Some students fail to graduate on time because they cannot enroll in a course needed for their major or for graduation.  Colleges need to rectify these types of problems and evidence should be reported to the College Scorecard or other Internet sites.
  • Increased Use of on-line courses:  The increases use of on-line courses can be an efficient approach when students are falling behind track for on-time graduation and when students need only a few courses to complete their degree.

Unanticipated Events that could lead to reduce on-time graduation rates:

Economic hardships and sexual assault undermine academic performance and delay the completion of academic programs.

  • On-time graduation would improve if more resources were available to assist students with housing and food.  This study found that economic hardships including lack of stable housing and lack of sufficient food impacts the ability of students to do well in food.
  • On-time graduation would improve if sexual assault was reduced and if resources were used to assist victims.  One study here discusses retaliation by perpetrators and institutional response.  This studyfound evidence that victims of sexual assault were more likely to experience a decrease in GPA and/or quit school. 

Concluding Remarks:  The ability to graduate on-time is a major determinant of the amount of debt a student takes on.  Policies and programs that better prepare people for college, that create incentives for colleges to helps students graduate on time and programs that assist students in difficult circumstances, would improve on-time graduation and reduce lifetime student debt burdens.

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