The Chronicle of Higher Education reports:
More than one out of eight student-loan borrowers who entered repayment from October 1, 2008, to September 30, 2009, defaulted within three years, the U.S. Education Department announced on Friday as part of its first release of official data on cohort default rates for federal student loans measured over three years.
The new figure on overall default rates, 13.4 percent, was released as the department switches from measuring the rates over three years instead of two. For-profit institutions had the highest average three-year default rates, at 22.7 percent, which was more than double the 11-percent rate among public institutions. Private, nonprofit institutions had an average three-year default rate of 7.5 percent.
Interesting that public institutions had a higher default rate than private ones. (Other data I’ve seen suggests that those enrolled at private universities borrow greater amounts on average.)
And in what is apparently more recent data, USA Today reports two-year default rates (i.e., the rate of student borrowers who default within two years of entering repayment):
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.
Three-year default rates are higher than two-year default rates. Why? My understanding is that a former student is not declared to have defaulted on their loan until they miss nine monthly payments. It’s a lot easier to do that over a 36-month span than a 24-month span.
College–if done right–is often a good investment, but it’s not for everyone, and certainly not at any price. Students would do well to think twice before accepting big loans. The rich rules over the poor, and the borrower is the slave of the lender. (Prov. 22:7)