Student Loan Defaults Spike

Published

May 26, 2011

Contributing writer for Credit.com, Chris graduated with honors from the Columbia University Graduate School of Journalism, and has reported for a number of publications including The New York Times, TIME magazine and Popular Mechanics.

The rate of student loan defaults spiked by 26% in 2009, the biggest single-year increase on record, according to a report released last week by the U.S. Department of Education. The problem was especially grave at private, for-profit universities, where former students defaulted at more than twice the rate of those at public schools.

Nationwide, 3.6 million alumni and former students started repaying their school loans in 2009, according to the report. Of them, 327,699, or 8.9%, went into default.

That’s a significant increase over 2008, when 7% of borrowers went into default. In 2007 the rate was 6.7%.

The problem was especially pronounced at for-profit universities, the education department found. Students at for-profit schools made up just 14% of the people entering repayment in 2009. But they accounted for 47.4% of loans going into default. The default rate for students of for-profit schools has hovered around 10% for each of the last three years.

Meanwhile, 5.1% of students from public universities went into default, half the rate of for-profit students. Students at private, nonprofit schools performed even better; 4.5% of their students entered default in 2009. But even that represents a disturbing 32% increase since 2007, the education department found.

[Related Article: 8 Ways to Ease the Student Loan Burden]

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