Sep

14

Student loan defaults continue to rise

Tagged Under : Loan, Student Loan

More borrowers across all education sectors are defaulting on their student loans, study shows

Credit card delinquencies and charge-off rates have steadily declined in recent months, but the same cannot be said for student loans. The most recent information reveals the national student loan default rate for fiscal year 2008 rose to 7 percent, up from 6.7 percent in 2007, according to the Department of Education.

The department examined the default rate for borrowers who began their repayment period between October 1, 2007 and September 30, 2008, and defaulted before September 30, 2009. According to the information, roughly 268,000 individuals defaulted on their student loans during this repayment period.

The federal entity released data that analyzed the default rate by sector and showed borrowers had more difficulties meeting their repayment obligations across the board. The default rate for borrowers who attended public institutions rose from 5.9 to 6 percent from 2007 to 2008, while the rate for those attending private schools climbed from 3.7 to 4 percent. For-profit schools also saw a jump in the rate of default, increasing from 11 to 11.6 percent.

“This data confirms what we already know: that many students are struggling to pay back their student loans during very difficult economic times,” U.S. Secretary of Education Arne Duncan said. “That’s why the Administration has expanded programs like income based repayment and Pell grants to help students in financial need.”

Separate studies show student loans have surpassed credit cards as the largest form of debt that Americans carry. The increasing rate of student loan defaults may result in more young Americans seeing their credit scores plummet, a trend that will jeopardize their ability to secure financing, competitive rates and employment in the future.


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