Student Loan Default Rates Edge Up

May 4, 2010

Education Department projections suggest that the poor economy is continuing to push up the rates at which borrowers are defaulting on their federal student loans. Department officials on Sunday released a draft of a report on the "cohort" default rate for 2008 -- the proportion of federal loan borrowers who began loan repayments between October 2007 and September 2008, and who defaulted on their loans by the end of September 2009. The data show that rate climbing to 7.2 percent from the official 2007 rate of 6.7 percent, which in turn had risen sharply from 2006's 5.2 percent. Rates rose fairly proportionally across all sectors of higher education, with borrowers who attended for-profit colleges defaulting at a rate of 11.9 percent (up from 11.0 percent in 2007), public college borrowers at a rate of 6.2 percent (up from 5.9 percent), and private nonprofit college borrowers at 4.1 percent, up from 3.7 percent. The higher rates, if they continue to climb, suggest that increasing numbers of institutions could find themselves at risk of penalties as the government begins following defaults over a three-year instead of a two-year window, beginning in 2014.

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