Blog

Browse All Blog Topics

Three-Year Default Rates Show Difficulty of Student Loan Repayment

Dec 14, 2009

by Scholarships.com Staff

As Congress continues to puzzle out questions of student loans and consumer protection, new information released today suggests that young adults attempting to repay their student loans may be having even more trouble than previously thought.

As a condition of the Higher Education Opportunity Act, the US Department of Education has started tracking three-year instead of two-year default rates for federal student loans. The first set of data was released today and the numbers are pretty shocking: the three-year cohort default rates are nearly twice as high as the two-year rates overall--11.8 percent compared to 6.7 percent.

Default is defined as failure to make payments on a student loan according to the terms of the master promissory note the borrower signed, and federal student loans are considered in default only after nine months of missed payments. This means that 12 percent of students who started repaying their loans in 2006 had stopped making payments for 270 days or more by September 2009.

The difference between two-year and three-year default rates was most dramatic at for-profit colleges, rising from 11% to 21.2%. For-profit colleges have the highest default rates in both two-year and three-year measures, and also make up the largest proportion of institutions that may lose the ability to distribute federal student financial aid in 2014, when the rule changes associated with the new three-year default rate calculations go into place.

Colleges will become ineligible to participate in federal student aid programs if their cohort default rates are above 30 percent (currently 25 percent) for three consecutive years, or if they go over 40 percent any one year. Inside Higher Ed has published a list of institutions whose three-year cohort default rate is over 30 percent this year-in addition to a number of for-profit colleges, several community colleges have also made the list.

In addition to this information's implications for colleges, it also means that default on federal student loans is even more common than previously assumed. More than 1 in 10 students currently default on a loan within three years, and it's possible that a significant percentage of students may default on their loans after more time has passed. If you're planning to borrow to pay for college, do so wisely. You may want to make sure that you only take out an amount that you can pay back in a worst-case employment scenario. It's not too late to start your scholarship search for next year (or even this year) to help cut down on the amount you have to borrow, as well.

Going to college doesn't have to break the bank or saddle you with tens of thousands of dollars in student loan debt. Check out the Scholarships.com free college scholarship search where you’ll discover you qualify for hundreds of thousands of dollars in scholarships in just a few minutes, then apply and win! It’s that easy!

Discuss

Share your thoughts and perhaps thousands of students will benefit from your unique insight on the subject!



If you can read this, don't touch the following fields


 

Most Shared Articles

Prospective Rhode Island college students may score two years of free college with Governor Gina M. Raimondo's $30 million plan, Rhode Island's Promise. Beginning with the class of 2017, the plan would foot full tuition bills and mandatory fees, according to Inside Higher Ed.

In an effort to "knock down the financial barriers to obtaining a college degree," Gov. Raimondo's proposed [...]

0 months ago 0 comments Read More

College is supposed to be the best four years of your life. Or as one sociology professor claims: "a big four-year orgy." Was college always this fun? History may indicate otherwise, and Lisa Wade highlights a "demographic shift" 300 years ago that changed the college campus landscape and made colleges bastions of sex, booze, and entitlement.

U.S. colleges during the colonial era [...]

0 months ago 1 comments Read More

While you can always increase your chances at landing a scholarship - increasing your community service and extracurricular involvement, having good grades and writing strong essays - winning one isn't always guaranteed...or can it be? According to TIME Money, one way to secure a scholarship is to apply to, and attend a college that guarantees its incoming class free college money. Here [...]

0 months ago 5 comments Read More

A burglar who targeted college apartments in Cobb County is now in jail after Kayla Mesar, a freshman university wrestler threatened and scared him off campus property.

The identified suspect, Amir Williams had allegedly broken into several other college apartments near Life University before entering Mesar's unit through a back unit where her mother had stood. Mesar, who was around [...]

0 months ago 2 comments Read More

In hopes of boosting the local economy, Tennessee state education officials spent roughly $1 million this past year in advertising enticing college dropouts to finish what they started.

The state's partnership with Tennessee Reconnect is just one of several comeback programs established to combat the "nearly 37 million working adolescents nationwide [that] have some college credits [...]

1 months ago 1 comments Read More

College can be expensive, and while some may rely on scholarships, grants, loans or their parents to foot the bill, one Jacksonville woman got creative and sold her urine and positive pregnancy tests on Craigslist for a little extra cash.

Why would anyone ever purchase positive pregnancy tests or urine? The three-months pregnant woman, who chose to remain anonymous, didn't really [...]

1 months ago 3 comments Read More

Teenagers aren't using drugs, alcohol, and tobacco as much as they used to, according to a new national study. Substance use rates have declined significantly and are at their lowest since the 1990s. Despite this trend, researchers caution that there is still high use of marijuana for a certain age group.

The Monitoring the Future study, conducted by U-M's Institute for Social [...]

1 months ago 7 comments Read More

Rather than basically give you 23 birds for the first 7 of the 12 days of Christmas, we've compiled a holiday list of scholarships yule adore...with a head start too! Check out these scholarships that'll last a few days after you enjoy the holidays:

NATA Business Scholarship

[...]

1 months ago 3 comments Read More

The mantle of "College President" is one that includes a lot of responsibility and scrutiny, but for some in the higher ranks, the lucrative pay makes it worth it. According to data released by The Chronicle of Higher Education, some private-college presidents have made over $5.4 million in a single year.

The average annual salary for full-time college/university presidents in 2014 [...]

1 months ago 2 comments Read More