NAICU Washington Update

Weak Economy Pushes Default Rates Higher

September 23, 2011

The nation's continuing economic problems pushed student loan default rates higher in fiscal year 2009, according to new data from the Department of Education. The overall two-year cohort default rate (CDR) rose to 8.8 percent in FY 2009, up from 7.0 percent in FY 2008. The rates, released earlier this week, include defaults by federal student loan borrowers who began repayment on Oct. 1, 2008, and defaulted before Sept. 30, 2010.

Despite the expansion of the income-based repayment plan designed to help borrowers with low incomes avoid default by extending their repayment over a longer period of time, CDRs increased for all sectors: from 4.0 percent to 4.6 percent for private, nonprofit institutions, from 6.0 percent to 7.2 percent for public institutions, and from 11.6 percent to 15 percent at for-profit schools. The rate for the private, nonprofit sector was 3.7 percent in FY 2007.

Less-than-two-year private, nonprofit colleges had a default rate of 14.5 percent, which exceeds the rates of public and for-profit institutions. Two-year private, nonprofit colleges, with a rate of 10 percent, are lower than either.

Click here for details on cohort default trends, and break-downs by state, institution type, and institution. A table of state CDRs is available here.