Scary new student loan default numbers released
Default levels the highest in nearly 20 years.
October, the month of Halloween, is beginning with a scary new report on student loan defaults.
The latest numbers on federal student loans show that one in ten borrowers are defaulting within two years and nearly 15 percent are defaulting within three years. Michael Stratford of Inside Higher Ed offers these details:
The rate at which borrowers of federal student loans default on their debt within two years after beginning repayment rose for the sixth consecutive year, reaching its highest level since 1995, according to data released Monday by the Education Department.
One in ten borrowers across the country, 475,000 people, who entered repayment during the fiscal year ending in September 2011 had defaulted by the following September, the data showed. That’s up from 9.1 percent of a similar cohort of borrowers last year.
Even more borrowers are struggling in delinquency when the period of measurement is extended to three years. The percentage of borrowers defaulting within three years after beginning repayment has also risen from 13.4 percent to 14.7 percent for the most recent cohort of borrowers available (those who entered repayment from October 1, 2009 to September 30, 2010 and had defaulted by September 2012). The 14.7 percent default rate represents 600,000 borrowers.
The default rate is used by the Education Department to potentially cut funding to institutions that have high large proportions of borrowers defaulting on their loans. Colleges are currently barred from receiving federal student aid money if their default rates are 25 percent or higher for three consecutive years or if they exceed 40 percent in a single year.
The Education Department is in the process of transitioning to using only the three-year default rates. Next year will be the first year for which institutions will face penalties based on their three-year rates, which student advocates say is a welcome change since the measurement will be more expansive. Still, though, some argue that the cohort default rates don’t reflect the full burden of debt that students borrow.
“Even at schools where lots of students borrow, [default rates] don’t tell you how many students are behind on payments, overloaded with debt or defaulting after more than three years,” Debbie Cochrane, research director at The Institute for College Access & Success, known as TICAS, said in a statement. TICAS has also issued reports about how colleges are manipulating their default rates to be lower than they actually are by combining programs or pushing students into unnecessary forbearances.
Student loan defaults hit highest level since 1995 (Inside Higher Ed | News)
Comments
While we’re all playing “whack-a-mole” with “default crisis” and “cost of education” etc the real problems not being addressed:
1) Once the federal gov’t became the loan officer and guarentee of “all the money you can ask for” colleges have raised their prices to the point where we are now – where college grads are burdened with crushing debt upon graduation.
2) Colleges have increased bureaucracy and “diversity” and other pet political projects on campuses, and passed the costs on the the “consumer” (student). Since all this money is paid back “sometime in the future” and we’re dealing with very young adults – and parents want their kids to have a future – the colleges have created a monster debt program for their students.
3) A solution – which may or may not be workable, but I’d love to hear replies – is for colleges to co-sign for the loans. After all they keep saying the education is worth it, that’s it’s not disproportionate to what the former student can earn, and that all the “cultural growth” (read: political indoctrination) the student receives is worth it – let them put their money where their mouth is.
When people talk about lowering the cost of education schools howl that they are operating on a tight budget, all the while hiring “diversity coordinators”, building new buildings to house these programs, having “womyn’s” and “ethnic” studies programs that they make mandatory, and paying for those classes and those professors is justified.
Fine … it’s worth it – and it’ll pay off, and “the students are good for it” – then let the colleges share the risk.
After all – if the degree will pay off, and if this “cultural enrichment” adds to the student’s marketable value, and charging these students is done in good conscience, then why not have the colleges have skin in the game of a $30-150k debt the student walks out with.
I’ve heard all sorts of noise from academae about how the gov’t should “forgive” those loans (meaning letting the public pick up the tab) – let them “share the wealth” of their “eat cake” attitude.
Steven