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This is a complicated story. So, let’s begin with a familiar question: Why has college in the United States gotten so expensive?

For all the hand-wringing about glittery new medical centers, administrative bloat, and Bowdoin’s lobster dinners, the price of public college has gone up principally because public support from states has gone down. During the Great Recession, state income and sales revenues plummeted just as college enrollment increased. The CEA reports that “between 2008 and 2013, state revenues per full-time equivalent student at public colleges declined from $7,400 to $6,000.” Tuition rose, but young people, families, and even adults going back to school couldn't afford the new sticker prices, particularly in a recession. So they tapped the federal government for help. Pell Grants and other forms of government assistance increased by about $1,000 per student. This has fed another theory, the so-called Bennett hypothesis, that some schools—particularly for-profit institutions—saw that they could capture more money by continuously raising tuition and relying on the federal government to provide aid at any cost.

These stories are interconnected. As state spending on college dropped, the price of public colleges increased, driving more low-income students into the arms of for-profits. The share of college students attending for-profit schools tripled between 2000 and 2011.

When many people imagine a college student, they see a 19-year-old kid from a middle-class family who graduates on time, give or take a few years. But the typical for-profit student is a 24-year-old from a first-generation family earning less than $40,000, who eventually drops out of school. The completion rates for two-year and four-year for-profit institutions is about 40 percent and 25 percent, respectively.

In the final analysis, declining state support for public college fed the rise of for-profit schools, many of which served as factories for dropouts with relatively small amounts of outstanding student debt. These are the people most at risk of default—not the college graduates with $100,000 loan burdens, but rather low-income students who took on a few thousand dollars in debt and didn’t even get a degree.

The result is this highly counterintuitive and absolutely crucial chart from the CEA, showing that students with the smallest loan burdens are the most likely to default.

Share of Borrowers Who Default, by Loan Size

CEA

This is, at first blush, so paradoxical so as to seem like a math error. Adults with student debt under $5,000 are eight-times more likely to default than adults owing more than $40,000? This figure simply does not compute in a narrative driven by the largest student debt numbers—like six-figure balances and $1.3 trillion total student debt. The most-quoted statistic I see about student debt is that the “average” burden is nearly $30,000. But this one is more important: Loans of $10,000 account for two-thirds of all defaults.