Monday, February 14, 2011

New Federal Data Show Rising Student Loan Default Rates

New Federal Data Show Rising Student Loan Default Rates: The federal government’s new system to calculate student loan default rates – while highlighting the problems of many for-profit colleges – also may pose risks for some minority-serving institutions (MSIs) that are seeing their rates increase as well.

The 2008 renewal of the Higher Education Act changed the way the government measures defaults by calculating the number of students who fail to repay loans in the first three years of repayment period. Prior to that law, the rates were based solely on those who default during the first two years of repayment.

While supporters say the new system provides a better snapshot of the default problem, new U.S. Education Department data show dramatic increases in default rates for many schools. Colleges will not face sanctions under the new system until 2014, but the latest data – listing the default rates of individual colleges under both systems – are drawing attention.