Student Loan Default Rate Jumps From 7 to 8.8 Percent

The number of college graduates/dropouts who defaulted in the first two years of repayment rose from 7 percent to 8.8 percent, the Department of Education has announced. Borrowers who attended for-profit colleges and public colleges (which cater to low-income students) drove those numbers up: 

The cohort default rates increased for all sectors: from 6.0 percent to 7.2 percent for public institutions, from 4.0 percent to 4.6 percent for private institutions, and from 11.6 percent to 15 percent at for-profit schools.

The rates announced today represent a snapshot in time, with the FY 2009 cohort consisting of borrowers whose first loan repayments came due between Oct. 1, 2008, and Sept. 30, 2009, and who defaulted before Sept. 30, 2010. More than 3.6 million borrowers from 5,900 schools entered repayment during this window of time, and more than 320,000 defaulted. Those borrowers who defaulted after the two-year period are not counted as defaulters in this data set.

Education Secretary Arne Duncan's response: 

“These hard economic times have made it even more difficult for student borrowers to repay their loans, and that’s why implementing education reforms and protecting the maximum Pell grant is more important than ever,” said U.S. Secretary of Education Arne Duncan. “We need to ensure that all students are able to access and enroll in quality programs that prepare them for well-paying jobs so they can enter the workforce and compete in our global marketplace.”

These numbers could be a wooden stake in the heart of the for-profit college industry, which became the vampiric behemoth it is today thanks to federal aid and shitty occupational licensing laws that require hair stylists, interior designers, and florists to spend tens of thousands of dollars learning their craft. Why Duncan is insisting that more money be funneled to schools that will turn around and jack up tuition and fees, as opposed to lambasting state legislatures that require poor people to attend for-profit colleges before they can transcend the grease-caked plexiglass ceiling of customer service, is beyond me.  

Consider Rick Perry's regulation-free dustopia, where becoming a barber requires 150 hours of instruction at a federally subsidized for-profit college. Two of the schools from which the Department of Education will deprive aid as a result of the new default numbers teach hair-styling. One of them is in Texas. That's money down the damned drain.

But I digress.

Default rates are up for everybody else, too, yet this report will probably not hurt public and private non-profit colleges. To qualify for negative attention from the feds, a school's default rate has to hover between 25 and 40 percent for three years running. The worst non-profits are close to that, but there are fewer of them (averages!). That will likely change. Graduates (or dropouts) whose first loan payment is due between October 2009 and September 2010 have equally bad job prospects as the preceding class. Just as many are finding it difficult to land jobs that are commensurate with their level of education, and the cost of that education. 

Also keep in mind that this is the default rate for a small segment of outstanding student loans. This report doesn't include defaults after the first two years of repayment, which means people who default through years one, two, and into three aren't recorded. Also, federally subsidized loans allow for up to 60 months of forbearance over the life of the loan, which means there could be quite a few out-of-work or under-employed 2008 graduates who have yet to make a payment, but aren't technically defaulting. 

For more, see: "Moody's Sounds the Alarm on Student Borrowing" and Reason.tv's "The Case Against College Entitlements."

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  • Restoras||

    Which one is Riggs in that pic?

  • ||

    Bubble, meet pin.

  • some guy||

    Don't worry. This bubble is so small compared to the last one, nobody will even notice it.

  • ||

    That's what's great about today's America--everything is much, much bigger.

  • Booger||

    What the fuck are Robster Craws?

  • Ike||

    Somebody FOIA Dept. of Ed. and get the overall default rate for graduates of the past 10 years

  • kilroy||

    What education bubble?

  • ||

    This statistic is probably tied to the increase in marijuana smoking in the 18-25 age group.

  • Jersey Patriot||

    It's not just the licensure requirements. American business has, in general, lost its collective mind. Jobs that once required a reasonably bright high school graduate now require 4, perhaps 6, years of education.

    My grandfather worked as a clerk for a major chemical company for decades. He was a high school graduate who could read, write, and do figures. Today his job title would be four words long and require a master's in paper pushing. It just doesn't make sense.

  • JKH||

    This is by design, Jersey. It's used as a methodology to weed out huge numbers of applicants for fewer and fewer job postings being handled by fewer and fewer screeners.

  • ||

    Bingo. Businesses fear the costs of having to screen large numbers of potential employees and so they use "weed out" methods that on their face make no sense at all.

  • Anonymous Coward||

    Not only that, but businesses are unwilling to train anyone. I see ads online requiring servers have 5 years experience. 5 FUCKING YEARS SERVING FOOD. As someone who has served food, it's not rocket surgery. It's not even brain science. You take the orders, you get drinks, you serve the food, refill the drinks, and calculate the bill. Any person of average intelligence could probably do the job competently in about 1-2 weeks and yet you 5 YEARS EXPERIENCE.

    Getting a job in America, even a low paying job has become kabuki theater.

  • Fist of Etiquette||

    Traditional higher education will be obsolete in the new order.

  • ||

    Who are our new overlords so I can welcome them?

  • ||

    “We need to ensure that all students are able to access and enroll in quality programs that prepare them for well-paying jobs so they can enter the workforce and compete in our global marketplace.”

    I love boilerplate gibberish.

  • Brandon||

    I prefer authentic Frontier Gibberish.

  • ||

    Everyone will have a well paying job so everyone can live better than everyone else.

    Umm, where did that goalpost move to again?

  • Anonymous Coward||

    There are no goalposts because the winners are no longer objectively determined (one goal = 1 point), but subjectively (the Russian judge gives the Russian figure skaters 10s).

    The myth of the college degree as a golden ticket is losing steam. It's not about what you know, it's about who you know. A high school grad from Trinity School could probably get a better job than a masters graduate from a land grant college.

  • ||

    NERDS!!!!!11!

  • CashAdvancesUS||

    Well, student loan problem is still one of the most popular in the USA.For lots of young people who want to get higher education it's hard to avoid taking out a student loan, so they get into debt that it's getting harder and harder to pay off.I am sure that student loan rates should be more affordable for students, our governments set the education as a priority and it's impossible to get a normal job without a good education(but more often we see occasions that it's hard to do even if you have an education).Students need not just a quality education that will allow them to get well-paid jobs, but also loans that they will be able to repay.

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