$50.8 Billion in Student Loans in Default

student-loan-defaultsThe rate of borrowers who will default on student loans is higher than short-term government estimates indicate, reports the The Chronicle of Higher Education. According to their data, 20 percent of government loans that started repayment in 1995 have gone into default. The rate is even higher for students attending two-year colleges.

Defaulting on student loans leads to serious personal and financial burdens. Borrowers become ineligible for additional federal aid and can have their wages and tax refunds seized by the government. It also ruins future credit ratings, making it difficult to obtain mortgages, car loans or credit cards.

Loan money that is not recovered by the government must come from taxes. At the end of the 2009 fiscal year, $50.8 billion of student loans were in default.

For-profit institutions are being submitted to a congressional investigation, which will examine the cost and quality of the education they provide. After 15 years of repayment, 40 percent of students attending for-profit schools default on loan payments. Although only 10 percent of college students attend for-profit educational institutions, these students make up a quarter of Pell Grant and federal student loan recipients.

The Career College Association of for-profit colleges cites socio-demographic differences to account to the low rate of loan repayment. “Four-year public and nonprofit colleges and universities have more affluent populations,” Harris N. Miller, the association’s president. “Four- and two-year career colleges have less affluent populations.”

However, those who represent community colleges point to the fact that their students borrow much less and serve a similar demographic. The data points to concerns about the rising costs of higher education.

Also Read:

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Which Student Loan is Best for You?

College Presidents who Make Over $1 Million

3 Responses to “$50.8 Billion in Student Loans in Default”

  1. nlb says:

    My husband and I have advised several students over the past couple of years about avoiding unnecessary student debt. It’s so much better to go on a scholarship to an affordable school, or to take longer and work your way through, and graduate debt-free, or with minimal debt.

  2. Bunny says:

    So many cheaper schools are a bargain; hopefully families will avail themselves of better info and choose not to go into debt they can’t repay, ever.

  3. Bunny says:

    I think that for the last several years, students have been wrongly advised that “any amount of debt is worth it to get a good education.” This article shows up what a fallacy that advice is. Math classes in high school should require students to learn about the consequences of debt–any debt, and the consequences of defaulting on this particular type of debt.

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