Student Loan Default Rates

Posted by Michael • July 21, 2010

Those of you with an interest in default rates — student loan default rates, in particular — will want to set aside a few minutes to read the following:

Chronicle Of Higher Ed: Student-Loan Default Rates: Understated

Of course findings such as the following will come as a complete and utter shock to everyone (not!):

According to unpublished data obtained by The Chronicle, one in every five government loans that entered repayment in 1995 has gone into default. The default rate is higher for loans made to students from two-year colleges, and higher still, reaching 40 percent, for those who attended for-profit institutions.

One in every five loans that entered repayment in 1995 are in default? Yikes. That is nasty. As in, subprime nasty. This is worth mentioning because, according to the fine folks at S&P in July, 2009 …

S&P now projects defaults on subprime loans issued in 2005, 2006 and 2007 at 11 percent, 30 percent and 49 percent, respectively.

So the folks issuing student loans to pretty much anybody with a pulse still have some work to do to reach those vaunted levels we associate with subprime default rates. Keep at it, guys! You’re making progress!

Back to the Chronicle piece:

But it’s the high rates of default at for-profit institutions that are likely to get the most attention from members of Congress, who have recently raised concerns about the cost and quality of for-profit higher education. Fifteen years into repayment, two out of every five loans made to students who attended two-year for-profit colleges are in default.

Boy — this would be really troubling to hear if we didn’t recognize that student loans are undoubtedly “good debt” meant only to help you reach your dreams!

1 Response to "Student Loan Default Rates" ...

On July 23, 2010 @ 10:34 pm,
AZ Joe wrote:

#1

I am not surprised. Many of the people I have known who attend 2 year for profit schools are being trained for things like Medical Receptionist – which does not require a degree or even specialized training beyond a good High School education and dental hygienist, for which there are 20 people trained for each one job available. People are making bad choices, but the schools are, I believe, negligent if not criminal promising good, high paying jobs for the asking. IT AIN’T TRUE!! There may be a few schools who truly deliver what they claim, but I have seen few of them.

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