U.S. student loan default rate rises to 8.8 percent
The U.S. Department of Education reported yesterday that the percent of individuals who defaulted on their student loans in fiscal year 2009--which ended on September 30th, 2010--rose to 8.8 percent, up from 7.0 percent in fiscal year 2008.
The default rates increased in all sectors, the Department of Education reports --from 6.0 percent to 7.2 percent at public institutions, from 4.0 percent to 4.6 percent at private institutions, and from 11.6 percent to 15 percent at for-profit schools.
The default rates reported this week reflect borrowers whose first repayments came due between October 1, 2008 and September 30, 2009, and who defaulted before September 30, 2010. During that time, more than 320,000 of 3.6 million borrowers from 5,900 schools defaulted. Borrowers who defaulted after the two-year period are not counted.
What's being done about defaults?
Efforts are underway to both help inform students and help relieve their debt burden. Recently, the Obama Administration expanded its flexible loan repayment program via the "income-based repayment plan," the Department of Education notes. In this program, student loan payments are capped based on a grad's income and family size.
Furthermore, the Department of Education recently released "College Affordability" lists to help inform families about the real costs of college. Schools with the lowest and highest tuition and fees are noted, as well as those institutions with rapidly increasing tuition rates.
"These hard economic times have made it even more difficult for student borrowers to repay their loans, and that's why implementing education reforms and protecting the maximum Pell grant is more important than ever," U.S. Secretary of Education Arne Duncan said in a statement. "We need to ensure that all students are able to access and enroll in quality programs that prepare them for well-paying jobs so they can enter the workforce and compete in our global marketplace."
Due to excessive default rates (either exceeding 25 percent for three consecutive years, exceeding 40 percent in the latest year, or both), the following five schools will lose eligibility in one or more federal student aid programs this year: Tidewater Tech in Norfolk, Va.; Trend Barber College in Houston, Texas; the Missouri School of Barbering and Hairstyling in St. Louis, Mo.; Sebring Career School in Houston, Texas; and Human Resource Development & Employment - Stanley Technical Institute in Clarksburg, W. Va.