A new survey of Iowa's community colleges conducted by the Association of Community College Trustees examines the complexities students are up against when trying to repay federal loans.

The results provide a snapshot of who is most likely to default on their student loans, how defaulters react to their debt problems and other important insights about today's student loan environment.

The biggest news from the study is that students with the least debt are the most likely to default on their loans.

The survey found that by January 2015, more than 25 percent of the fiscal 2011 cohort (students who started repaying loans between Oct 1, 2010 and Sept. 30, 2011) had defaulted on their student loans.

Most of the loan amounts were less than $10,000, with loans of $5,000 or less making up half the loans in default.

While it might seem paradoxical that those who owed the least defaulted the most, the survey points out that the students with the largest loans are the most likely to attend graduate school on their way to well-paying professional jobs.

For example, at least 85 percent of graduates with medical or law degrees were borrowers and this group had average debt loads exceeding $100,000. MBA borrowers, 62 percent of all MBA graduates, owed $43,200 on average. This contrasts with just 17 percent of community college students who were borrowers.

Other revealing statistics regarding community college students include the following:

  • Their average age is 28, older than the average student at a four-year institution
  • About a third were part of their family's first generation to attend college
  • They were more likely than four-year students to attend part time, 59 percent vs 22 percent
  • Most community college attendees have jobs and 17 percent are single parents

All of these factors put community college students at a competitive disadvantage to students at four-year colleges and universities, placing the two-year students at greater financial risk.

Many drop out before obtaining their degrees, working at jobs that pay less than those taken by graduates. The result of these challenges is clear: higher student loan default rates.

For the 2012 fiscal cohort, that average default rate for community college students was 19.1 percent vs 11.8 percent for all college students.

The survey also found:

1. Default rates among students with low loan balances could be greatly reduced by simplifying federal support programs, increasing outreach from the educational institutions and better servicing of the loans.

2. About 43 percent of defaulters take no action to stave off default, such as getting a deferment or forbearance. Most defaults occur within one year of starting repayment and few defaulters try to rehabilitate their loans. Better counseling about repayment options would help students figure out how to handle repayments, especially in the first year.

3. Ninety percent of defaulters in the study did not obtain a credential. The study suggests the need for innovative programs to help students progress toward completion and to limit borrowing in the early stages of school attendance.

4. Institutions would do a better job at managing defaults if they had easy access to complete and user-friendly information, including the loan servicing behavior of borrowers.