National Default Rate on Student Loans Declines for Third Straight Year

The overall three-year cohort default rate on federal student loans dropped in newly released data, marking the third straight year the rate has fallen, the U.S. Department of Education announced on Wednesday.

The percentage of borrowers who defaulted on federal loans within three years of entering repayment dropped from 11.8 percent to 11.3 percent for those who started repayment between the 2012 and 2013 fiscal years.

Colleges with high default rates may lose their access to federal student aid, and based on the new data, nine for-profit colleges and one private nonprofit institution may forfeit that eligibility. Last year 15 colleges exceeded the department’s cutoffs.

The default rate among public institutions fell from 11.7 percent to 11.3 percent, and those colleges make up about 27.2 percent of all institutions in the data. For private institutions, the cohort default rate increased from 6.8 percent to 7 percent. Those colleges represent 28.2 percent of institutions in the data.

Colleges become ineligible for federal aid when their default rate exceeds 30 percent for three years in a row or 40 percent in a single year. Colleges that rack up a default rate of 30 percent or greater must convene a default-prevention task force to determine why the rate is so high, and then submit their plans to the department.

Correction (9/28/2016, 4:32 p.m.): This post originally stated incorrectly that default rates among public colleges made up 27.2 percent of all borrowers who entered repayment in a designated time period. Public colleges make up 27.2 percent of institutions represented in the data. The article also originally stated that default rates for private colleges accounted for 28.2 percent of borrowers who entered repayment. Private colleges represented 28.2 percent of institutions in the data. The post has been updated to reflect this correction.

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