Before enrolling in an Iowa community college, Darnisha Ryan was a fast food manager at Wendy’s. She worked long hours. Ryan said she wasn’t paid well.
“I don't see myself really going anywhere if I don't do something more with myself,” Ryan said.
She couldn’t afford to go to any other college except Cedar Rapids’ Kirkwood Community College. Now, Ryan has found stability as a paralegal training coordinator living in De Soto, Iowa, and she’s working on getting her bachelor’s degree in legal studies.
She would’ve liked to become an attorney, but further education would cost her too much. Ryan has $17,000 in student loan debt.
She said if she lost her job, if one of her kids had a medical emergency, or if anything unexpected happened, her life would look completely different.
Ryan is a graduate who’s been able to find a job with a salary that works for her. But many other former community college students aren’t so lucky.
Default impacts
In 2020, when the Education Department paused student loan repayments during the COVID-19 pandemic, collections on defaulted loans were also paused. Now, millions of former students are facing loan defaults — and many of them might not even realize it.
A federal loan default happens when a student fails to make a payment on their loan after a year. Borrowers in default might see a reduction in their Social Security payments, wage garnishments or a decline in their credit scores.
Defaulted borrowers are not the only ones who face consequences. If a college’s loan default rate goes over certain thresholds, it could lose its access to federal student aid.
“It pretty quickly gets to where you wouldn’t be able to function as a higher ed institution, particularly a community college, because so many of our students are Pell,” Community Colleges for Iowa Executive Director Emily Shields said.
Community colleges are especially at risk of losing access to funding, since their former students are more likely to default than students who attend four-year institutions, according to Columbia University’s community college research center. When students don’t graduate and they have loans, they may not make enough money to afford repayments.
For people like Ryan, not having access to Pell grants would’ve made community college unaffordable.
“I wouldn’t have gone to college,” Ryan said.
Community college financial aid departments are intensifying their efforts to notify borrowers about their loan status. But they won’t know if they’re successful until the official numbers are released after three years, when it would be too late to avoid sanctions.
It’s hard to predict what the consequences of those penalties would be for a college’s enrollment and its continued viability, experts told The Midwest Newsroom.
An unusual situation
The sanctions based on default rates are supposed to protect the integrity of student aid, Shields said. Under normal circumstances, a high default rate indicates students are borrowing too much, or a school’s tuition is too high — or both.
“If colleges have really high default rates, then it stands to reason something's wrong there, right?” Shields said. “Like, they aren't preparing students to make enough money to pay off their loans.”
But the pandemic set up an unusual situation.
Nationally, only 38% of all student loan borrowers are in repayment and current on payments, according to the Education Department. The remaining borrowers are either delinquent or in forbearance, deferment or a grace period.
"You’ve had students that have graduated and never had to deal with anything loan-based at all. They’ve never had to make repayments."Maggie Walker, Indian Hills Community College director of financial aid
Nearly one in three federal student loan borrowers find themselves at risk for default, according to TransUnion, a credit monitoring company. In April, the percentage of borrowers 90 days past due on their loans was at 31% — the highest figure ever recorded, almost triple the pre-pandemic rate.
“Places with pre-COVID default rates in the 20s [percentages in the 20s] could go up. Those default rates could go up 10% to 20% later this year, because that’s when it’s all going to hit at once,” Shields said.
For places like Indian Hills Community College, the sanctions would upend years of progress in bringing down their default rates.
With three campus locations in southeast Iowa last year, Indian Hills serves some of the poorest counties in the state. In 2024, around 4,000 students were enrolled. A quarter of them received Pell grants — federal money for students who display exceptional financial need. Unlike loans, Pell grants do not have to be repaid.
About 69% of students enrolled in the college last year relied on loans, federal or private, that have been reported to the institution by the student or lending organization.
“You’ve had students that have graduated and never had to deal with anything loan-based at all. They’ve never had to make repayments,” said Maggie Walker, Indian Hills director of financial aid.
“This is where it gets really scary, and there’s just a lot of unknowns,” Shields said. “When this hits all at once like this, in a very unusual way, it’s very hard to know what that’s going to look like, even for colleges doing their very best.”
Former students are also facing limited options for income-based repayment plans because of federal legislation and court injunctions.
The One Big Beautiful Bill signed into law by President Donald Trump on July 4 includes provisions that change how borrowers can pay back their loans. Income-based repayment plans will be consolidated into one plan based on different calculations. The new plan could disproportionately affect low-income borrowers and cause a spike in defaults.
As of May, almost 2 million people have pending applications for their repayment plans across all student loans, according to a court filing.
“There has been no indication from the Department of Education that they're going to reduce those rates or give us leniency over the first year,” Walker said.
Policy change confusion
Most community colleges outsource former student tracking to third-party consulting firms. Inceptia is one of those firms.
Inceptia’s Vice President Sue Downing said a lot of the confusion stems from conflicting policy changes over the last couple years.
As community colleges reach out to former students about their loans, responses have varied. Some didn’t know they had student loans; others thought their loans had been forgiven. Still others left college five years ago and their phone numbers and addresses have changed, making it more difficult to reach them.
It’s been especially tough to reach Gen Zers (people born between 1997 and 2012), Walker said, because they don’t pick up unknown calls or check their email accounts often.
“I would say most of our colleges are already overburdened, just in general, with their current work, and so this additional piece of reaching out to former students to try to help them is not something there’s a ton of staff capacity for,” Shields said. “So it feels like there’s more needed here than putting the onus back on colleges.”
At Indian Hills, Walker is focusing her efforts on educating students about their finances before they start their first year. She employs eight college and career transition coaches who work with students on a weekly basis.
Many of Indian Hills’ students come from the cycle of poverty, Walker said. She’s trying to make sure incoming first-years understand all of their financial options before they take out loans.
For Ryan, she said graduating from Kirkwood didn’t feel like an achievement. It was more of a relief. During her second year there, Ryan said she saw her tuition rise, rent increase, and even the price of eggs skyrocket.
She said she’s desperate to get a handle on her anxiety. To match the cost of living, Ryan feels like she needs to achieve more, to make more money, to have more savings, all to be able to afford the cost if anything were to happen.
Shields emphasized that many former students face difficult financial decisions.
“No one wants to go into collections. No one wants to default. That’s what we know about our students, is that they want to pay their loans,” Shields said. “If the choice is between prescriptions or food or student loans, what are you going to do?”
The Midwest Newsroom is an investigative and enterprise journalism collaboration that includes Iowa Public Radio, KCUR, Nebraska Public Media, St. Louis Public Radio and NPR.
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METHODS
Reporter Lucia Cheng started by looking through default rate data by sector via information gathered by Iowa College Aid. Then, she interviewed Community Colleges for Iowa Executive Director Emily Shields to ask how default rates would affect colleges, and discovered that community colleges are at risk for federal sanctions. She confirmed the risk after interviewing financial aid directors at Hawkeye Community College and Indian Hills Community College.
Cheng obtained more information from EdAmerica, a national education consulting firm. She followed up with Walker and Shields to clarify points made in earlier interviews. She interviewed Darnisha Ryan to understand how borrowers are navigating the situation. And she interviewed Jason Jabbari to understand the causes and consequences of student loans.
Cheng then conducted a final fact check with Inceptia, a third party consulting firm.
REFERENCES
Student Loan Debt of Postsecondary Education Graduates in Iowa: 2024
(Iowa Department of Education | May 21, 2024)
Trump Administration Threatens Schools With Student Loan Restrictions
(Wall Street Journal | May 5, 2025)
Iowa Community College Student Outcomes
(Iowa Department of Education, Iowa Department of Economic Development, Iowa Board of Regents)
“Hello Colleague” letter
(U.S. Department of Education | April 21, 2025)
Student Loan Delinquency Rate Skyrockets As 4 Million Borrowers Are Behind
(Forbes | March 7, 2025)
Student Loan Borrowers Are Leaving SAVE Plan for More Certain Repayment Options
(Investopedia | May 30, 2025)
Iowa Community College Profiles
(Iowa Department of Education, Iowa Department of Economic Development, Iowa Board of Regents)
Gov. Default Rate Sanctions Explainer
(Federal Student Aid, U.S. Department of Education)
COVID Payment Pause Explainer
(Federal Student Aid, U.S. Department of Education)
US Map of Student Delinquencies
(Newsweek | May 14, 2025)
Student Loan Delinquencies Are Back, and Credit Scores Take a Tumble
Federal Reserve Bank of New York | May 13, 2025)
Student loan and credit card delinquencies are surging
(Quartz | July 1, 2025)
Background interview: Jason Jabbari, assistant professor and leader of the Center for Education Research, Practice, and Policy Partnerships (CERP3), Washington University, St. Louis, Missouri
Date of interview: July 18, 2025
TYPE OF ARTICLE
Enterprise — in-depth examination of a subject requiring extensive research and sourcing.
