Federal Student Loan Default Rates See Slight Uptick


10/4/2017 6:33:00 PM

U.S. Department of Education’s standard to measure student loan defaults yields increase for the first time since 2013 while the overall long-term rates have declined.

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Consumers who entered repayment plans for federal student loans between fiscal years 2013 and 2014 defaulted at a higher rate than their peers who began repaying in the previous fiscal year. The default rate inched up from 11.3 percent to 11.5 percent, according to a news release from the U.S. Department of Education.  

“During the tracking period for the FY 2014 borrower cohort (Oct. 1, 2013 to Sept. 30, 2016), more than five million borrowers entered repayment, and 580,671 of them—or 11.5 percent—defaulted on their loans,” according to the news release. 

The FY 2014 cohort default rate is the percentage of a school’s borrowers who entered repayment on Federal Family Education Loan (FFEL) Program or William D. Ford Federal Direct Loan (Direct Loan) Program loans between Oct. 1, 2013 and Sept. 30, 2014 and subsequently defaulted prior to Sept. 30, 2016.

Borrowers in the group attended 6,173 postsecondary schools across the U.S.

Overall the trends of default rates have seen a sharp decline over the past five years, “the rate has decreased 3.2 percentage points from a high of 14.7 percent to 11.5 percent today,” based on the data released.

There are 1,733 private schools in the U.S. and the default rate increased from 7.4 percent for fiscal year 2014 compared to 7 percent for fiscal year 2013. In contrast, the default rate for the 1,663 public schools remained flat at 11.3 percent in both FY 2014 and FY 2013.

Ten schools highlighted by the DOE may lose access to their federal student aid program due to higher default rates based on a three-year cohort default rates standard by the department.

According to the DOE, the Higher Education Opportunity Act of 2008 was amended to require that, starting in 2014, “sanctions against institutions with high cohort default rates would be based on the three-year cohort default rates. All institutions with a default rate that is equal to or greater than 30 percent must establish a default prevention task force that prepares a plan to identify the factors causing the school’s cohort default rate to exceed 30 percent and submit the plan to the department.”

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