Student loan default rates increase -- especially at for-profit schools
The national student loan default rate is rising, according to new statistics released today, and students who obtain loans to attend for-profit schools are more likely to default than those in nonprofit institutions.
Education Secretary Arne Duncan announced today that the national “cohort default rate” for fiscal year 2008, the latest available data, is 7 percent, up from 6.7 percent from fiscal year 2007. Here are the breakdowns:
Public institutions -- Increased from 5.9 to 6 percent
Private nonprofit institutions -- Increased from 3.7 to 4 percent
For-profit institutions -- Increased from 11 to 11.6 percent for for-profit schools.
Though for-profit schools have the highest default rates, they get a disproportionate share of federal aid dollars.
According to a July article in The Chronicle of Higher Education, which has the headline “Government Vastly Undercounts Defaults,” for-profits educate less than 10 percent of students but received close to a quarter of Pell Grant and federal student loan dollars in 2008-09.
The Education Department reported that in 2008-09, students at for-profit schools represented 26 percent of the borrower population and 43 percent of all defaulters.
"While for-profit schools have profited and prospered, thanks to federal dollars, some of their students have not,” Duncan said in a statement. “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."
The default rate released today, the Education Department said, 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, the department said. They attended 5,860 participating institutions. Borrowers who default after their first two years of repayment are not measured as defaulters in today’s data.
The Obama administration pushed through a major overhaul of the student loan program this year in an effort to reduce the burden on students. It is also proposing new regulations -- which are needed -- to more closely monitor federal aid that goes to for-profit colleges.
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| September 13, 2010; 1:37 PM ET
Categories: College Costs | Tags: college costs, for-profits and students loans, loan default rate increases, student loans, students and loan student rate
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