3-Year Student Loan Default Rate at 13.4%: U.S. Officials

For the first time, U.S. Department of Education officials have reported the default rate for student loans after the first three years: 13.4 percent through Sept. 30, 2011.
That’s a slight decrease from the 13.8 percent three-year default rate that ended in 2010.
For-profit institutions had the highest average three-year default rates at 22.7 percent, while public institutions followed at 11 percent and private non-profit institutions at 7.5 percent.
U.S. officials are providing a wider perspective on student loan performance than the two-year default rates previously provided. Congress required a more comprehensive measure in response to reports that college counselors were encouraging students to defer payments.
The two-year default rate had reached its highest level in 14 years at 9.1 percent.
The 13.4 three-year default rate covers both public and for-profit colleges.
But for-profit college default rates are much higher. Based on the three-year measure, the default rate was 22.7 percent on for-profit student loans. Based on the two-year period, they reported a 12.9 percent default rate.
“We continue to be concerned about default rates and want to ensure that all borrowers have the tools to manage their debt,” said U.S. Secretary of Education Arne Duncan in a statement. “In addition to helping borrowers, we will also hold schools accountable for ensuring their students are not saddled with unmanageable student loan debt.”
To help students access the tools they need to avoid defaulting, the Education Department said it has redoubled its efforts to make borrowers aware of their repayment options. One such option is the Income-Based Repayment, which allows borrowers to cap their monthly student loan payments at 15 percent of their discretionary income.
The Education Department also recently released an interactive financial aid counseling tool that helps borrowers with their college financing decisions, including information on flexible loan repayment options.
For more information on Income-Based Repayment and the online counseling tool, students can visit www.studentaid.gov.

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