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Student Loan Default Rate Continues to Decline

September 26, 2019
 
 

Data released by the Education Department Wednesday showed that the share of borrowers defaulting on their student loans has declined for the sixth straight year.

Of borrowers who entered repayment in 2016, 10.1 percent had defaulted on their loans by 2018 -- down from 10.8 percent from the previous year.

For-profit colleges had the highest rate of defaults at 15.2 percent compared to 9.6 percent at public and 6.6 percent at private colleges.

Borrowers enter default when they go more than 270 days without making a payment on their federal student loans. That outcome leads to damaged credit scores and can mean wages or government benefits are garnished. Borrowers in default are also barred from accessing additional federal student aid until their loans are repaired.

The federal cohort default rate standard is the only accountability rule that applies to all Title IV institutions. Colleges can lose access to Pell Grants and federal student loans if their default rate is 30 percent or higher for three consecutive years. They can lose loan eligibility if the rate is 40 percent or higher in a single year. But colleges are rarely barred from federal aid thanks to the rule.

This year, 15 colleges are subject to sanctions -- including 13 for-profit, one public and one private institution. Those colleges can avoid sanctions with successful appeals.

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