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


 
Comments (0)

Most Shared Articles

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 was roughly [...]

0 months ago 1 comments Read More

Perhaps your 2017 New Year's Resolution is to earn more free college money - that's our goal for you! 2016 is now coming to an end, and so are these scholarship deadlines, so hurry and apply to these end-of-the-year awards while you still can! Girls Who Illustrate Awesomeness Scholarship [...]

0 months ago 6 comments Read More

The incoming Trump administration could reverse President Obama's actions on college sexual assault, giving hope to those who claim their lives were destroyed by false rape claims. However, this raises concerns for some that perhaps those who have been victims of sexual assault and made legitimate reports may not get the protection they deserve. Since 2011, colleges and universities have been [...]

1 months ago 5 comments Read More

Students are being called to "expose and document" professors "who discriminate against conservative students, promote anti-American values, and advance leftist propaganda" on a new website called Professor Watchlist. Turning Point USA, a 501(c)3 non-profit organization founded in 2012 promotes ideas of free-market capitalism and "educates students about the importance of fiscal [...]

1 months ago 7 comments Read More

Finding trustworthy and accurate scholarship and other financial aid information can be tricky these days, especially when it comes to sources that offer unreliable, often misleading content. "Scholarships" offered by scammers who charge fees and operate outside the laws, rules and ethics of modern-day netiquette abound. Here at Scholarships.com, we carefully and thoroughly vet [...]

1 months ago 0 comments Read More

American Flags designated for a Veterans Day ceremony at Brown University were torn and trashed by university students. While a group tried to protect remaining flags, others continued what they believe was a "justified" protest against the recent presidential election. The American flags arranged on Brown University's Main Green flew in honor of the annual Veteran's Day ceremony, which made [...]

1 months ago 16 comments Read More

Black Friday deals will be unleashed in just two weeks with some of the largest retailers getting an early start on Thanksgiving Day. When it comes to end-of-the-year scholarship hunting, no worries - we've got you covered. Score big this holiday season (and semester) with free college money: RMA Foundation [...]

1 months ago 0 comments Read More

The Associate Dean featured as the "chief villain" in a discredited Rolling Stone article on an alleged gang rape at the University of Virginia has been awarded $3 million by a federal court jury. This decision followed an earlier ruling that the discredited article ruined her reputation and "undermined her work to help students who had been sexually assaulted." In November 2014, Rolling Stone [...]

1 months ago 6 comments Read More

November is National Scholarship Month and in its honor, we're doing what we do best - offering the best scholarships out there to help students like you fund the cost of college. Whether you're in high school trying to land some free money before heading off to school or a college student looking to pay next semester's tuition, here are some of the few generous scholarships available to [...]

1 months ago 0 comments Read More