Student-Loan Default Rates Rise as Federal Scrutiny Grows
More than one in 10 borrowers defaulted on their federal student loans, intensifying concern about a generation hobbled by $1 trillion in debt and the role of colleges in jacking up costs.
The default rate, for the first three years that students are required to make payments, was 13.4 percent, with for-profit colleges reporting the worst results, the U.S. Education Department said today.
College graduates, wearing caps and gowns, walk into House Majority Leader John Boehner’s office on Capitol Hill to deliver mock diplomas with more than 10,000 signatures of students and parents demanding an affordable college education. Photographer: Mark Wilson/Getty Images
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The Education Department has revamped the way it reports student-loan defaults, which the government said had reached the highest level in 14 years. Previously, the agency reported the rate only for the first two years payments are required. Congress demanded a more comprehensive measure because of concern that colleges counsel students to defer payments to make default rates appear low.
“Default rates are the tip of the iceberg of borrower distress,” said Pauline Abernathy, vice president of The Institute for College Access & Success, a nonprofit based in Oakland, California.
The data follows complaints that commission-driven debt collectors the government hires aren’t telling students about affordable options to repay their debt, especially a plan that lets them make payments tied to their incomes. Students have borrowed $1 trillion to pay for higher education, surpassing credit-card debt.