A growing number of student loan borrowers are making an expensive mistake.
According to a recent study by the think tank Education Sector,29 percent of all college students that take out student loans are dropping out of school: a percentage that has increased one-quarter over the past decade. (H/t The Washington Post.)
The percentage of college student loan borrowers that are dropping out of school is rising at all types of universities, though especially at for-profit colleges, according to the study. Of student loan borrowers at four-year for-profit colleges, 54 percent drop out, in addition to one-third of all student loan borrowers at community colleges and one-fifth of student loan borrowers at both public and private four-year colleges.
Dropping out of college costs significantly more in lost earnings than it saves in unpaid tuition. College dropouts earn about $800,000 less than college graduates over their lifetimes, according to a recent Georgetown study.
Perhaps more alarmingly, the unemployment rate among college dropouts that are 25 and older now is even higher than the unemployment rate among high school graduates that never went to college at all, according to Labor Department data cited by Reuters blogger Felix Salmon.
Only 56 percent of four-year college students finish their degrees within six years, according to a recent Harvard study cited by Reuters. College students are dropping out because of lack of preparation and the high cost of tuition, according to study.
The lower earnings that result from dropping out of college, coupled with student loan debt that usually cannot get wiped away even in bankruptcy, can lead to years of financial hardship. Total outstanding student loan debt in the U.S. now exceeds $1 trillion, according to the Consumer Financial Protection Bureau.