NAICU Washington Update

Loan Default Rates Rise after 15-year Decline

September 28, 2009

Every September, the Department of Education publishes its final student loan cohort default rates (CDR).  This September marks the second year in a row that the rates have risen - even for four-year private colleges, which traditionally have lowest default rate of all the sectors.

Since 1990 when the CDR topped out at 22.4 percent, the rates declined steeply over the next decade, and settled at about 5 percent since 2000.  The overall rate announced this month - reflecting defaults for the 2007 fiscal year - is 6.7 percent, up from 5.2 percent for 2006 and 4.6 percent for 2005.  The new CDR captures defaults on loans that went into repayment between October 1, 2006, and September 30, 2007, and defaulted before September 30, 2008.

The overall default rate for private colleges for 2007 is 3.7 percent, although the small number of private two-year colleges show a CDR of 12.6 percent.  The overall rate for public institutions is 5.9 percent (4.3 percent for four-year schools), and the rate for proprietary schools is 11 percent.

The state with the lowest CDR is Montana at 2.3 percent, and Wisconsin is the only other state below 3 percent. Arizona, at 9.8 percent, had the highest rate.  Additional information is available on the Department of Education Web site.

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