College Loan Defaults Hit 18-Year High
The moribund U.S. economy and the bleak jobs picture have collided to produce the highest college loan default rate in 18 years, according to data released Monday by the Department of Education.
"Some colleges are simply masking default problems until the federal
government stops watching," said The Institute for College Access and Success vice president Pauline Abernathy. "These kinds of deceptive tactics protect colleges while
putting students and taxpayers at even greater risk after the school is
off the hook."
Student loan default rates have risen for the sixth year; 14.7 percent of federal student loan cohorts had defaulted on their loans within three years. The year prior, the three-year default rate was 13.4 percent. Between October 1, 2010 and September 30, 2011, more than 475,000 college students—an average 10 percent—defaulted on their loans.
Rory O'Sullivan, research director for the Washington nonprofit Young Invincibles, told the Boston Globe that a student defaulting on his or her loans can bring a lifetime of financial consequences.
"It's a financial disaster for borrowers," said O'Sullivan. "Defaults can dramatically affect their credit rating and make it harder to borrow in the future."
Two-thirds of college graduates leave school with an average $26,600 in loan debt.
Nationally, American student loan debt now stands at $1.2 trillion.