Report on U.S. Higher Education Institutions and Student Loan Default Rates in the Context of Sustainable Development Goals

Recent federal data indicates a critical challenge facing the United States higher education sector, with significant implications for the achievement of several Sustainable Development Goals (SDGs). Over 1,100 colleges and universities are at risk of losing eligibility for federal financial aid programs due to high rates of student loan nonrepayment among their former students. This situation directly threatens progress on SDG 4 (Quality Education), SDG 8 (Decent Work and Economic Growth), and SDG 10 (Reduced Inequalities).

The Cohort Default Rate (CDR) as an Indicator of Educational Efficacy

Defining the Accountability Metric

The primary metric for this assessment is the Cohort Default Rate (CDR), which measures the percentage of a school’s borrowers who default on their federal student loans within a three-year period after entering repayment. Federal regulations impose severe sanctions on institutions with persistently high CDRs:

• A CDR exceeding 40% in a single year results in the potential loss of access to the Direct Loan Program.
• A CDR above 30% for three consecutive years can lead to the loss of eligibility for both the Direct Loan Program and federal Pell Grants.

Implications for Sustainable Development Goal 4: Quality Education

The CDR serves as a crucial proxy for institutional performance and its alignment with SDG 4. A high default rate suggests that an institution may not be providing an education of sufficient quality to ensure graduates can secure employment that allows for financial self-sufficiency. The potential loss of federal aid for nearly one-fifth of U.S. colleges would severely impede progress on SDG Target 4.3, which aims to ensure equal access for all to affordable and quality tertiary education.

Analysis of Current Nonrepayment Data

Scope of the Issue

Interim data from the Department of Education as of May 2025 reveals a widespread problem. While these are not the final official CDRs, they serve as a strong indicator of future trends.

• 1,113 institutions exhibited nonrepayment rates above 30%.
• 388 institutions had rates exceeding the critical 40% threshold.
• This represents nearly 20% of the 5,736 institutions tracked by the Department.

Distribution Across Institution Types

The issue is not confined to a single sector of higher education, indicating a systemic challenge that impacts progress toward SDG 10 (Reduced Inequalities) by potentially limiting educational access for diverse student populations.

1. Proprietary (For-Profit): 851 schools
2. Public, Non-Profit: 148 schools
3. Private, Non-Profit: 111 schools

Causal Factors and Their Link to SDG 8: Decent Work and Economic Growth

Post-Pandemic Economic Realities

The current spike in nonrepayment follows the conclusion of a multi-year pause on student loan payments. As of May 2025, only 38% of borrowers are current on their payments, with a quarter already in default or late-stage delinquency. This widespread financial distress among graduates points to a significant disconnect between educational outcomes and the principles of SDG 8, which promotes sustained, inclusive, and sustainable economic growth, full and productive employment, and decent work for all. High default rates are a clear signal that graduates are not achieving the economic stability necessary to service their educational debt, thereby hindering their personal economic growth and contributing to financial precarity, which also relates to SDG 1 (No Poverty).

Institutional Accountability and Regulatory Response

Federal Mandates for Improvement

The Department of Education has urged institutions to take direct responsibility for improving student outcomes, reinforcing the principles of SDG 16 (Peace, Justice and Strong Institutions), which calls for effective, accountable, and transparent institutions at all levels. Colleges are now mandated to:

• Proactively contact former students to provide information on repayment options.
• Conduct comprehensive entrance and exit counseling on loan obligations.
• Provide clear disclosure of tuition costs and net price.
• Maintain accurate student contact and enrollment information.

Consequences of Non-Compliance

Failure to lower CDRs has severe consequences. The loss of Title IV federal funding, which can constitute up to 90% of revenue for some institutions, would likely lead to closures. This regulatory framework is designed to hold institutions accountable for the value of the education they provide and their contribution to positive student outcomes. An institution failing to prepare its students for sustainable careers, as evidenced by high default rates, is fundamentally failing to contribute to national sustainable development objectives.

Conclusion: A Systemic Challenge to Sustainable Development

The impending crisis of high Cohort Default Rates exposes structural weaknesses within the U.S. higher education system. It highlights a failure at many institutions to align educational offerings with the economic realities faced by graduates. This issue transcends mere financial metrics, representing a significant obstacle to achieving SDG 4 (Quality Education), SDG 8 (Decent Work and Economic Growth), and SDG 10 (Reduced Inequalities). Addressing this challenge requires a concerted effort from educational institutions and policymakers to enhance educational quality, ensure post-graduation success, and maintain the integrity and accountability of the higher education sector.

SDGs Addressed in the Article

SDG 4: Quality Education

• The article’s central theme is higher education, focusing on access, affordability, and outcomes. It discusses how federal financial aid, such as Pell Grants and student loans, is crucial for millions of students to access college. The potential loss of this aid for over 1,100 institutions directly threatens equitable access to tertiary education.
• It also questions the “quality” of the education provided by institutions with high default rates. The article states, “if such a high percentage of students cannot afford to repay their student loans after graduation, the school is charging too much and/or not preparing its students for the workforce after graduation.” This links the financial outcomes of graduates directly to the quality and relevance of their education.

SDG 8: Decent Work and Economic Growth

• The article connects education to employment outcomes. The inability of former students to repay their loans is presented as a strong indicator of their financial instability, which is often a result of unemployment, underemployment, or low wages.
• The article notes that “High loan default rates often correlate with low graduation rates, low earnings, or high debt levels,” which points to a failure of these institutions to prepare students for “decent work” and “productive employment” that would allow them to be economically self-sufficient.

SDG 10: Reduced Inequalities

• The article highlights how the potential loss of federal financial aid could disproportionately impact students from lower-income backgrounds who rely on this support to attend college. This would exacerbate inequalities in access to higher education.
• It also points out that a large number of the at-risk institutions are for-profit (“Proprietary: 851 Schools”), which often serve vulnerable student populations. The failure of these institutions and the subsequent loss of aid could deepen existing inequalities of outcome for these groups.

SDG 1: No Poverty

• The issue of student loan default is directly linked to financial hardship. The article mentions that the Department of Education will “begin wage garnishment by the end of summer,” a measure that can push individuals with low incomes further into financial distress or poverty.
• The system of federal aid is intended to be a pathway out of poverty, but when it results in unmanageable debt, it can have the opposite effect. The article implies that the high cost of education relative to post-graduation earnings is a structural problem trapping graduates in a cycle of debt.

Specific SDG Targets Identified

SDG 4: Quality Education

1. Target 4.3: By 2030, ensure equal access for all women and men to affordable and quality technical, vocational and tertiary education, including university.
   • The article directly addresses this target by explaining that federal financial aid is the “primary way millions of students pay for college.” The risk of nearly “one-fifth of colleges nationwide” losing access to these funds threatens the principle of “equal access” to “tertiary education.” The high default rates also call into question the “affordability and quality” of the education being offered.
2. Target 4.4: By 2030, substantially increase the number of youth and adults who have relevant skills, including technical and vocational skills, for employment, decent jobs and entrepreneurship.
   • The article supports this by stating that a high default rate is an “embarrassing signal to students, families, and policymakers that an institution is not serving its graduates well.” It further explains the premise behind the Cohort Default Rate (CDR) penalty: “the school is… not preparing its students for the workforce after graduation.” This directly links the value of education to the acquisition of “relevant skills for employment.”

SDG 8: Decent Work and Economic Growth

1. Target 8.6: By 2030, substantially reduce the proportion of youth not in employment, education or training.
   • The article implies a connection to this target by highlighting high student loan nonrepayment as a symptom of poor post-graduation outcomes. It notes that “High loan default rates often correlate with… low earnings,” which is a direct consequence of graduates struggling to find stable, well-paying employment. The high number of defaults suggests a significant portion of young graduates are not achieving economic stability, a key component of this target.

SDG 10: Reduced Inequalities

1. Target 10.3: Ensure equal opportunity and reduce inequalities of outcome…
   • The federal aid system is a policy designed to promote “equal opportunity” in higher education. The article shows how this system’s failure, evidenced by high default rates leading to aid cutoffs, could “reduce inequalities of outcome” in a negative way by closing off educational pathways for future students who depend on that aid. The article notes this “could have profound effects in access to higher education.”

Indicators for Measuring Progress

• Cohort Default Rate (CDR): This is the primary indicator explicitly defined and used throughout the article. It is calculated as “the number of borrowers who default on their student loans within three years by the total number of borrowers who entered repayment in that time.” The article uses specific CDR thresholds (30% and 40%) as key metrics for institutional failure.
• Nonrepayment Rate: The article introduces this as a “proxy” indicator used by the Department of Education. It is defined as “the percentage of borrowers who entered repayment after January 2020 and were either in default or more than 90 days delinquent as of May 2025.” The article provides data for this indicator, stating “1,113 colleges had nonrepayment rates above 30 percent.”
• Percentage of Borrowers Current on Payments: This is a direct measure of the financial health of the student borrower population. The article cites a specific figure: “As of May 2025, only 38 percent of borrowers with Direct Loans or Department-held FFEL loans are current on their payments.”
• Post-Graduation Earnings: While not quantified with specific data, this is an implied indicator. The article states that high default rates correlate with “low earnings,” suggesting that graduate income levels are a key measure of an institution’s success and the value of its degrees.
• Institutional Revenue from Federal Aid: The article implies this is an indicator of institutional dependency and vulnerability. It notes that “Some colleges receive upwards of 90% of their revenue from Title IV funds,” indicating that a loss of this funding would lead to closure.

SDGs, Targets, and Indicators Analysis

Source: forbes.com