“New data from the U.S. Department of Education show that 10.1 percent of federal student loan borrowers who entered repayment in 2016 had defaulted on their loans by 2018, a decrease from the prior year’s rate of 10.8 percent.
“The decline in national cohort default rates is encouraging, but it is only a part of the story. Low-income students, Black students, and students who are single parents are at least twice as likely to default within 12 years of leaving college.
“While default rates fell at all types of colleges, the lowest rates and steepest declines were at public and nonprofit colleges. A smaller share of borrowers were enrolled at for-profit colleges, which continue to have the highest rates of default. Students who attended for-profit colleges furthermore account for a vastly disproportionate share of student loan defaults. For-profit colleges enrolled only 9% of all students, yet 33% of the borrowers who defaulted attended for-profit colleges.
“Default is unequivocally the worst outcome for student loan borrowers. Its consequences are costly, long-lasting, and often punitive, and they can leave students worse off than if they had never attended college at all.
“The 2016 rate is the lowest since the current definition of the cohort default rate was adopted seven years ago. This progress shows that the cohort default rate is a critical tool for focusing colleges on preventing default. Default rates are even more important now that the Department of Education has repealed regulations protecting students against career programs that routinely leave students with unaffordable debts.
“With more a million students defaulting on their students loans each year and the Department of Education rolling back borrower protections, there is an urgent need for Congress to pass comprehensive legislation on college affordability. Congress should strengthen the cohort default rate and hold colleges accountable for unaffordable debts and predatory behavior. Congress also needs to invest in Pell Grants, encourage states to invest in college affordability, and make it easier and more affordable to repay student loans.”
TICAS’ key recommendations for federal policymakers to reduce the burden of student debt can be found here: https://ticas.org/policy-agenda/
Background: Colleges’ “cohort default rates” (CDRs) measure the share of their federal student loan borrowers who default within a specified period of time after entering repayment. Colleges with high CDRs may lose future eligibility for federal grants and loans. The rates released today are for borrowers who entered repayment in federal fiscal year 2016 (FY16) and defaulted in FY16, FY17, or FY18.
A student defaults on a federal loan after at least 270 days (nine months) of non-payment. Defaulting on a loan has several serious consequences, including adding significantly to the cost of a loan and ruining the borrower’s credit score. For colleges, defaulted loans are not generally counted in their cohort default rate until they are 360 days (nearly one year) overdue, leaving a gap of up to 90 days between when borrowers and colleges may first experience the consequences of default.
For more information, please see our CDR Resources Page.
The Institute for College Access & Success is a trusted source of research, design, and advocacy for student-centered public policies that promote affordability, accountability, and equity in higher education. For more information see www.ticas.org or follow us on Twitter and Facebook.