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National Student Loan Default on the Rise

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New statistics released by the U.S. Department of Education on Monday, September 13th show that the number of college students that have defaulted on student loans has increased since the previous year.

The Department of Education releases official cohort default rates once per year; cohort default rates are the percentage of borrowers who enter repayment in a fiscal year and default by the end of the next fiscal year.

Data for student loans in the 2008 fiscal year—which runs from October 1, 2007 to September 30, 2008— is the most recent available.

Current Student Loan Default Rate Highest Since 1997

U.S. Secretary of Education Arne Duncan announced that the fiscal year 2008 national cohort default rate is 7.0 percent, up from 6.7 percent for fiscal year 2007 and 5.2 percent the year before. The default rates increased from 5.9 to 6 percent for public institutions, from 3.7 to 4 percent for private institutions, and from 11 to 11.6 percent for for-profit schools.

The national loan default rate is currently the highest it has been since 1997, when 8.8 percent of more than 2.1 million borrowers defaulted on student loans.

“This data confirms what we already know: that many students are struggling to pay back their student loans during very difficult economic times. That’s why the Administration has expanded programs like income based repayment and Pell grants to help students in financial need,” said the U.S. Secretary of Education Arne Duncan in a press release.

The current 7.0 percent default rate represents the cohort of borrowers whose first loan repayments came due between October 1, 2007 and September 30, 2008, and who defaulted before September 30, 2009. During this time, almost 3.4 million borrowers entered repayment, and more than 238,000 defaulted on their loans. They attended 5,860 participating institutions, and Epoch Times staff reported that students who attended for-profit schools are more likely to default on their loans than students who attended not-for-profit schools.

For-Profit Colleges Often Have Higher Loan Default Rates

That is nothing new; traditionally, for-profit colleges have had a higher cohort default rate than non-profit colleges and universities. The Department of Education has begun scrutinizing the for-profit college sector closer than ever before, and increasing cohort default rates have become only one measure of whether for-profit students are taking on more student loan debt than they can manage.

“Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use. This is a disservice to students and taxpayers, and undermines the valuable work being done by the for-profit education industry as a whole,” Secretary of Education Duncan affirmed.

According to education news source Inside Higher Ed, studies show that college students with “fewer financial resources have a harder time repaying loans” and that for-profit institutions have larger proportions of students from low-income backgrounds.

“We will continue to work with the Department of Education, students, graduates, lenders, and our institutions on default prevention strategies,” said Harris N. Miller, president of the for-profit college trade group known as Career College Association, “but we urge all involved to not use CDR rates, which fluctuate depending on the economy and are tied to student demographics, as a proxy on the value of our schools or the education we provide.”

Avoid Defaulting on Student Loans

Once a college student graduates or leaves school for other reasons, student loan repayment typically begins within six months. It’s important to realize that students are responsible for repaying student loans even if they did not graduate, cannot find a job after graduation, or were simply unhappy with their college or university. If you miss a student loan payment or make a late payment, your loan considered delinquent. Your lender may charge you late fees. If your student loan is 270 days or more past due, it’s in default.

If you’re having trouble making your student loan payments, contact your lender to discuss your options. If you default on student loans, your lenders or guarantors can legally garnish your wages, seize your tax refunds, and more. Student loan default will cause damage your credit rating—which can affect your ability to rent an apartment or qualify for a mortgage or other types of financing!

Further information about the current national student loan default rates can be found at the U.S. Department of Education website.


Melissa Rhone+

Melissa Rhone earned her Bachelor of Music in Education from the University of Tampa. She resides in the Tampa Bay area and enjoys writing about college, pop culture, and epilepsy awareness.

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