Student Loan Default Rates Rise, Income-Based Repayment Can Help
The Department of Education just released statistics showing that student loan defaults rose to an average of 13.4 percent last year, with 22.7 percent default rates for students who attended for-profit colleges.
But the data we have on student loan default rates isn't anywhere close to complete. Meet the “Cohort Default Rate,” that measures only those defaults that occur soon after a student loan borrower begins repaying his or her loans. At least the cohort has recently been expanded to include defaults within the first three years of repayment—a step in the right direction. 2012's report marks the first year that the Department of Education, as instructed by Congress, used a three-year cohort, as opposed to only reporting on the number of students who entered into default in the first two years of repayment.
In many ways, the report highlights trends and facts that many of us already knew. For-profit colleges continue to be a risky investment with 22.7 percent of borrowers defaulting in the past three years and 49 percent of these borrowers forecasted to default within the first 20 years of repayment, according to The New York Times' Tamar Lewin in writing about the report.
What kills me is that it’s tricky for student loan borrowers to access the tools and resources they need to avoid the negative consequences of defaulting on their student loans. The Department of Education has pledged to redouble its efforts to make borrowers aware of Income-Based Repayment. I’ve got my fingers crossed…
