Making Sense of Student Loan Outcomes

How Using Repayment Rates Can Improve Student Success

repayment-v2.pngRecently, the Institute for Higher Education Policy (IHEP) released a report, Making Sense of Student Loan Outcomes: How Using Repayment Rates Can Improve Student Success. The report examines the evolution of loan repayment rates and how such measures may prove useful – and for whom. As many AIR members know, IHEP is a Washington, D.C.-based organization that has become one of the go-to places for information about postsecondary data collection. In fact, it has been coordinating the Postsecondary Data Collaborative to bring together a community of like-minded organizations (including AIR) to advocate for better data about colleges and universities and their students. PostsecData, as it is colloquially known, is a helpful resource for those interested in keeping track of the latest news and events related to postsecondary data policy.

As IHEP’s report describes, loan repayment rates represent a relatively new way to think about postsecondary outcomes. Growing out of the gainful employment regulations, repayment rates have been considered primarily as an institutional accountability issue, particularly around taxpayer and consumer protection. It is a metric to which institutional researchers are likely to pay a greater amount of attention, if they haven’t been doing so already. The College Scorecard has already made institutional repayment rates more visible to policymakers and consumers alike. Proposed legislation and policy positions are increasingly advocating for a repayment measure to be incorporated in accountability schemes, such as various forms of proposed risk-sharing policies featuring it as a core measure.

The advantage of repayment rates is that, by accounting for students with delinquent loans or loans in forbearance and deferral status, they provide more detailed information about who is making a dent in reducing their debt in comparison to cohort default rates, and they may be more difficult for institutions to manipulate. The additional detail available through repayment rates also means that they can be useful to colleges, too, and not simply be an accountability concern. Institutions can use data on former students’ repayment patterns and current students’ debt commitments in order to better identify those who might be good targets for interventions that help them avoid negative loan-related outcomes. Such information can also be powerful for institutional financial aid offices as they counsel students, for example. And, as repayment rates (like cohort default rates) are consistently worse for students who fail to complete degrees or credentials, evidence to that effect can be influential in conversations about student success on campus.

Colleges can access these data for their current and former students by requesting a School Profile Report (SPR) from the U.S. Department of Education, and link that repayment information to their own data. Doing so allows the institutional research office to run disaggregations in order to better understand the experiences with loan repayment burden for different populations of students, especially non-completers and underrepresented minority, low-income, or first-generation students; for students in different academic programs; and even for different loan servicers. However, the experience of the institutions that participated in the IHEP project reported some challenges associated with the SPR data. As repayment rates start to play a larger role in accountability debates, institutional researchers, working in collaboration with their financial aid offices, can advocate for better access to data in order to make the best use of them but also to verify the repayment rate calculations being made by the government.

 

 

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JJ posted on 3/17/2016 1:22 PM
We should be very cautious about using terms such as "manipulation" or "manipulate" under any circumstances and in the context here of comparing the utility or merit of different accountability measures, such as cohort default rate and repayment rate. See the sentence in the third paragraph ending with "...and they may be more difficult for institutions to manipulate." Institutions have very little control, let alone ability to manipulate, the various aspects of student borrowing. Institutions are subject to numerous regulations regarding what they can and cannot do. For example, institutions must provide counseling about financial aid, entrance and exit counseling. Institutions can only deviate from the student borrowing the maximum allowable amount on a case-by-case basis using professional judgment. What institutions do not do is place students on forbearance and deferments, servicers perform that function. And there are certain eligibility criteria that students must meet before being placed on these.

The fact that there may be those, including policy makers, who may be under the impression that institutions can and have in fact manipulated cohort default rates should be of concern. Institutions should be prepared to discuss their role in student borrowing and repayment (including being in delinquent or default) status to disabuse those who hold this impression. Analysis, such as that proposed above, of institutional data on student borrowers is essential, including forbearance and deferment, to understand the relationship between these and default and repayment. It would be especially helpful to track the latter for longer than the required three-year window (which the new College Scorecard does); one of the reasons is postponement of loan repayment has time limitations.