Blog: The Educated Reporter

More Students Defaulting, Government Data Show

More students are defaulting on their federal college loans, new U.S. Department of Education data show.

The government calculated that in the 2011 fiscal year 10 percent of borrowers who’ve been in loan repayment for two years defaulted on their loans, compared to 9.1 for the preceding year. A more comprehensive three-year default figure was calculated for borrowers in repayment in the 2010 fiscal year. It also rose, growing from 13.4 to 14.7 percent compared to the previous year’s numbers.

The three-year cohort default rate, as the term is officially known, is larger than the two-year because over time more students slip into default. The federal government adopted the three-year calculation after legislation that reauthorized the Higher Education Act in 2008.

Federal law carries penalties for high default rates. The three-year rates won’t affect schools until next year. In July the Education Department released individual state data for the two- and three-year cohort method of calculation. Arizona (23.2 percent), Arkansas (19 percent) and Oklahoma (18.4) enrolled students with the highest rate of defaults, based on the three-year benchmark.

Private loans do not factor into the federal government’s figures.  

Arizona is home to the corporate headquarters of University of Phoenix, the country’s largest for-profit education provider. The industry has been hounded by critics for its high default rate. Its advocates argue the industry enrolls students who have comparatively lower economic means and should be given a break for educating those from the lower economic ranks. According to the latest government data, 21.8 percent of students who enrolled in for-profit colleges and universities defaulted on their federal loans three years into repayment. Public postsecondary students defaulted at a rate of 13 percent for the three-year figure. Nonprofit private school students were the least likely to default, doing so 8.2 percent of the time according to the three-year rate.

The two-year default rates announced today by the Education Department were calculated based on a cohort of borrowers whose first loan repayments were due in FY 2011 (between Oct. 1, 2010 and Sept. 30, 2011), and who defaulted before Sept. 30, 2012.

The three-year rates were calculated based on the cohort of borrowers whose loans entered repayment during FY 2010 (between Oct. 1, 2009, and Sept. 30, 2010), and who defaulted before Sept. 30, 2012.