Student loan defaults have risen for the sixth straight year, as
students from traditional non-profit universities have an increasingly
difficult time paying off their college debt.
Numbers released by
the Department of Education Friday show that of the 4.1 million
borrowers who began making payments in late 2009 and early 2010, 9.1%
defaulted within two years, up from 8.8% the year before.
loan defaults still continue to plague too many borrowers," said Debbie
Cochrane, research director for The Institute for College Access &
Success. "The numbers are distressing, and they needn't be so high."
credited the combination of skyrocketing student debt, the poor economy
and a lack of borrower education for the increase. Unlike previous
years, when default rates rose because borrowers at for-profit
universities were having trouble paying off their loans, this year's
rise was attributed to borrowers who attended more traditional
non-profit public and private universities. Public school borrowers
defaulted at a rate of 8.3%, up from 5.9% just four years ago.
the first time in four years, the two-year for-profit school default
rate dropped from the previous year, to 12.9% from 15%. Mark Kantrowitz,
publisher of FinAid.org and fastweb.com, financial aid websites, said the drop indicated that new reforms had worked.
and finance advocates have long been critical of for-profit schools,
saying they lure in unqualified students and didn't disclose enough
about employment or debt rates. In the past few years, they've
implemented new regulations on student recruitment and advertising, and
made some changes to financial aid.
"This is a sign those rules
are somewhat successful," Kantrowitz said. "All the criticism has lead
to these colleges trying to clean up their house."
He added that
he expects default rates have hit their peak, and expects them to drop
next year based on reforms, a reduction in interest rates and an
The two-year default figures released Friday
count borrowers who began their repayment in fiscal year 2010 -- meaning
they are mostly graduates of the 2009 class -- and measures the
percentage who fell a year behind in their payments by September 2011.
The data don't measure borrowers who default later in the life of the
The Department of Education for the first time also released
an official three-year default rate, which showed that given another
year of payments, last year's 8.8% default rate ballooned to 13.4%. The
department is in the process of changing its standard to look only at
the three-year rate, which critics say gives a more accurate picture of
the scope of loan defaults.
The three-year default data showed
that nearly half the borrowers in default had attended for-profit
colleges, despite comprising only 28% of the total borrowing pool, and
13% of enrolled college students.
Sen. Tom Harkin, D-Iowa, who has
led a series of committee investigations into for-profit education,
said the 22.7% three-year default rate from for-profit colleges was
"This default data raises serious questions about the
quality and value of the education students receive from these
schools," he said in a statement.
Experts said they were
disappointed by the increased level of loan defaults in light of new
programs aimed at curbing rates by allowing unemployed or lower-income
borrowers to base repayment as a percentage of their incomes.
Beatty, 25, said she received income-based deferral on one of her
loans, but two other lenders rejected her appeal. Beatty isn't counted
in the default numbers this year, because she didn't graduate until
2011, but the former University of Charleston basketball player will be
included in years to come, because she's already defaulted on most of
the $35,000 in student loans.
Beatty has degrees in sports
administration and business administration, but upon graduating from the
private university was met with West Virginia's slumping economy.
Despite applying for more than 100 jobs, she's only found part-time work
making $8 an hour. She volunteers as an assistant high school
basketball coach on the side.
"You think 'I'm going to get a job
when I get out, I'm going to pay back these loans, I'm going to be
set'," she said. "The next thing you know, I can't even find anyone to
"It's a lot of stress. It's scary. And all because you did the right thing -- which was to go to school and get off the street."
can ruin a borrowers' credit rating for years, lead to wage garnishment
and tax return seizures, lawsuits and other problems in joining the
military, getting a job or a security clearance, Kantrowitz said.
to the Project on Student Debt, two-thirds of college seniors
graduating from non-profit four-year colleges in 2010 had student loan
debt, and the average owed was $25,250 -- up 5% from a year earlier.
Unemployment rates among young college graduates, meanwhile, was 9.1% in
According to the Project on Student Debt, two-thirds of
college seniors graduating from non-profit four-year colleges in 2010
had student loan debt, and the average owed was $25,250 -- up 5% from a
year earlier. Unemployment rates among young college graduates,
meanwhile, was 9.1% in 2010.