As many as 1 million college students drop out or stop attending classes every year because of the money that they owe the institutions they are attending. Not student loans, per se, but back tuition, housing bills, library and lab fees. Universities will prevent students from enrolling in classes, graduate, transfer credits, or even try for certain forms of federal aid if they have an unpaid balance with the school.
At one school, up to 1,000 students per semester are required to withdraw because of this type of unpaid bill, often referred to as institutional debt. Most colleges and universities have to “purge” up to 4% of their students every term because of this type of unpaid bill, according to a consulting firm. About 22% of Americans between the ages of 25 and 64 have attended some college, but not received a degree.
Despite the massive amount of former students — possibly as highs 8 million — who are affected by this problem, little is known about its actual size and scope. Some suggestions include:
Current students and returning adults should have the option of rolling their institutional debt — alongside their loan debt — into income repayment plans, settling obligations to both their lenders and their alma mater through future earnings. Institutions can offer “finish-line” discounts that reduce unpaid balances as students near completion.
