Community | September 13, 2011 | 25 comments

Student Loan Default Rates Rise Sharply in Past Year

source: http://www.nytimes.com/2011/09/13/education/13loans.html?_r=1

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Schnookums
The share of federal student loan defaults rose sharply last year, especially at for-profit colleges and universities, where 15 percent of borrowers defaulted in the first two years of repayment, up from 11.6 percent the previous year.

According to Department of Education data released Monday, 8.8 percent of borrowers over all defaulted in the fiscal year that ended last Sept. 30, the latest figures available, up from 7 percent the previous year.

At public institutions, the rate was 7.2 percent, up from 6 percent, and at not-for-profit private institutions, it was 4.6 percent, up from 4 percent.

“Borrowers are struggling in this economy,” said James Kvaal, deputy under secretary of education. “We see a strong relationship between student default rates and unemployment rates.”

Although the new overall rates are the highest since the 1997, when they were also 8.8 percent, default rates peaked in 1990 at more than 20 percent.

The new rates represent a snapshot in time, covering the 3.6 million borrowers whose first loan payments came due between Oct. 1, 2008, and Sept. 30, 2009, and who defaulted before Sept. 30, 2010. More than 320,000 of those borrowers defaulted during that period.

Although for-profit colleges, which typically serve low-income students, enroll only about 10 percent of the nation’s undergraduates, Mr. Kvaal said, their students made up 150,000, or almost half, of the defaults.

The problem may be even greater. “Some research has shown that as few as one in five defaults at a for-profit college occur in the two-year window,” said Debbie Cochrane, program director at the Institute for College Access & Success, which runs the Project on Student Debt. “The extent of borrower distress is barely touched upon with these rates.”

A recent study by the Institute for Higher Education Policy found that for every borrower who defaults, at least two more fall behind in payments. The study found that only 37 percent of borrowers who started repaying their student loans in 2005 were able to pay them back fully and on time.

The Department of Education is in the process of switching to a three-year default rate, in an effort to capture a more accurate picture.

The high default rate at for-profit colleges, the fastest-growing sector of higher education, has become an increasing concern for the government, since such institutions depend on federal student aid for more than 80 (80!) percent of their revenues......

Continue at:
http://www.nytimes.com/2011/09/13/education/13loans.html?_r=1
  1. groups:
    Community,   News and Politics,   Business News & Analysis,   Community Spotlight
  2. tags:
    Education,  Student Loans,  For-profit Schools
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25 comments // Student Loan Default Rates Rise Sharply in Past Year

  • richardparks
  • Earl_Dixon
    • +1
      Earl_Dixon  

    • College "Bust your ass in class, end up middle class working in Wal-mart like the rest of the highschool Grads, but you get a bonus of Loans to repay" Sweet deal sign me up!

    • 9 months ago
  • Anonmaly
    • +3
      Anonmaly  

    • LMAO.... I get the best drugs in the WORLD from college students that are gaming the system, taking government money and whichever loans they can get to take the bare minimum of courses, and party like Hugh Hefner...

      College is a sham, you can learn all the same stuff online for free without the tax payer fitting such exuberant bills for drug parties....

      I'm not anti-education either (fuq trolls)...

      It's just that it's such a disgusting sick joke that these ungrateful drug addicts are getting way to much money to play, while people with actual needs are going without....

    • 9 months ago
  • squarethecircle
  • MotherForTruth
  • bailey78
    • +1
      bailey78  

    • I'm sorry to hear that so many that have worked so hard to get ahead in life have been put into such debt before their life even got started. I say file for a bailout like Big Corp did if you don't get oner just don't pay the loan back. Screw them because they will sure screw you.

    • 9 months ago
  • Dagum
  • bailey78
  • Schnookums
    • +3
      Schnookums  
    • bailey78:

      I know I've said this before, but it is for this reason that I wholeheartedly believe that future college graduates, burdened with debt that isn't repayable in the job market in which they graduate, will simply leave the country to escape the debt and to find jobs.

      The great intellectual migration that occurred over the last 100 years where the best and the brightest minds of the world all flocked to the United States is about to go into reverse.

    • 9 months ago
  • percipi224
    • 0
      percipi224  
    • Dagum:

      I had to bankrupt with my husband back in 92. My only debt was a student loan. I had owed 10 grand by 84 for grad school and paid 5 grand back thus far. I was continuing to pay through the bankruptcy. The D of E or some collection who ever. tried to sue in two different county courts while we were under bankruptcy protection. they were told twice, go to the fed court. they did not show up and the amount was discharged. 6 years later I start getting duns. I show them the discharge, they disappear for another 5 years or so. duns again. I show them the discharge. Gone. Right? wrong. two years ago here they come again taking my tax return. i go to the omsbudsman, show them the discharge, they insist I owe it. period. so i get a dun again a month ago. same amount owing for 19 years 25,000.00 they insist. show the payments finally but not the tax payment. bastards. In March of last year the Supreme court ruled that if the Dept. of Ed doesn't show up at bankruptcy hearings the debt is discharged. Do you think that makes them go away? NO they threaten to take my social security.....all I can say is, flying fickle finger of fate!!!!!! I would love to pay the original amount from bankruptcy...I couldn't at the time and for years after because I divorced that fellow. The sureist way to poverty is divorce. But when I tried to talk about this with them, repeatedly I either got yelled at, harassed or told no 25,000. period. no discussion. I will hire a big fat nasty attorney if they screw me out of my ss. (if the repug tea types don't do it first)

    • 9 months ago
  • Dagum
  • letsliveinpeace
  • Vic_Romano
    • +3
      Vic_Romano  

    • We're closing in on that $1T mark in student loans. It could be its own subprime meltdown. Or worse still, it could easily keep the U.S. economy stagnant for decades as graduates pay their debt instead of buying homes, automobiles and invest in their own retirement.

      There are a lot of education scam blogs out there that I enjoy reading. They really do make me wonder if the whole education lobby is nothing but a self-dealing entity.

    • 9 months ago
  • Schnookums
    • +5
      Schnookums  
    • Vic_Romano:

      ^'d.

      For-profit education pisses me off about as much as for-profit healthcare. It's just the most counterproductive way of extracting profit (economic rent) from a society. Healthy and Educated people are loads more productive, and relatively speaking, are easier to make a profit off of.

      The only thing that's left is to assume that they simply don't like sharing.

    • 9 months ago
  • Vic_Romano
    • +3
      Vic_Romano  
    • Schnookums:

      It's the idea of for-profit institutions cashing in on federally-backed student loans that pisses me off more than anything. If these guys are true private sector champions, then should they not be sucking off the government teat?

      Another thing that pisses me off is that we're now in the information age. Shouldn't the internet be bringing the cost of education down, and "democratizing" our education model, as opposed to sending its cost past the stratosphere?

      From a philosophical perspective, it would appear that the only thing kids are truly paying for is that proverbial piece of paper they can hang on their wall. I guess I should let Will Hunting finish the rest of my views on the subject.

      http://www.youtube.com/watch?v=QnZ0Y4rvz6E

    • 9 months ago
  • letsliveinpeace
  • Schnookums
  • bailey78
  • moodyblue
  • Schnookums
    • +2
      Schnookums  
    • bailey78:

      I love that line: "Same education you could have gotten from the public library for $1.50 in late fees".

      I agree in testing knowledge to earn degrees, but don't think that being driven to a classroom education is necessary......and certainly not for $25,000-$50,000+ per year.

    • 9 months ago
  • bailey78
  • Vic_Romano
    • +1
      Vic_Romano  
    • bailey78:

      That's what a lot of these youngsters are being induced to borrow to obtain an education. They're being told that a college degree is the only way to get a good job, and that these loans (WHICH CANNOT BE DISCHARGED IN BANKRUPTCY) can easily be paid back. But just try to get a good job with that political science or gender studies degree nowadays.

      But if you're some rich kid, it really doesn't matter though.

    • 9 months ago
  • bailey78
  • Vic_Romano
  • squarethecircle
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