NAICU Washington Update

Private Colleges Maintain Lowest Student Loan Default Rates

October 07, 2013

On September 30, 2013, the Department of Education released the most recent two-year (FY 2011) and three-year (FY 2010) cohort default rates. According to the Department, private nonprofit institutions had the lowest average cohort default rates for both the FY 2011 two-year rate and the FY2010 three-year rate - 5.2 percent and 8.2 percent - compared to public and for-profit institutions. 

Overall, the two-year national student loan cohort default rate (CDR) is back in the double digit range (10.0 percent) for the first time since 1995, when the rate was on a downward trend. More recently, the historical two-year CDR trend has been moving upward from a low of 4.5 percent in cohort year 2003. The three-year rate rose from 13.4 for FY 2009 to 14.7 percent for FY 2010.

For private nonprofit institutions, the two-year rate was the same as last year’s two-year rate, but the three-year rate increased slightly from 7.5 percent to 8.2 percent (see chart below). Four-year nonprofits had two- and three-year rates of 5.1 percent and 8.0 percent respectively. (Two-to-three-year private colleges’ rates were somewhat higher.)

As in previous years, for-profit institutions had the highest overall average for both the two-year and three-year rates, 13.6 percent and 21.8 percent respectively. All for-profit subsectors had FY 2011 two-year rates in the low teens and FY 2010 three-year rates over 20 percent. The three-year rate for four-year for-profits was 22.1 percent and 21.4 percent for the two-to-three-year for-profit schools.

Four year publics had a two-year rate of 6.8 percent, and a three-year rate of 9.3 percent. The two-to-three-year publics had a two-year rate of 15.0 percent, slightly higher than that of the two-to-three-year for-profit schools. Currently, more than 200 schools across all sectors have three-year rates over 30 percent.

Default Rate.JPG

For additional sector breakdowns go to:

Two year: 


Importance of Default Rates

Currently, the department takes action against schools with very high two-year rates – three years at 25 percent or one year at 40 percent. (The current two-year rate captures defaults on loans that entered repayment during FY 2011, which covers October 1, 2010 through September 30, 2011, and occurred before September 30, 2012.) For the past two years, the three-year rate has been provided for informational purposes. However, it will be the only rate published next year, covering loans entering repayment in FY 2011 and defaulting by September 30, 2013. After next year, students at schools that have a default rate of 30 percent or more for three years lose eligibility for Title IV student aid.

The department also provides CDR data by state. New Mexico had the highest CDR at 15.4 percent, followed by West Virginia at 13.6 percent. North Dakota and Guam had the lowest percentages at 4.3 percent. For information about your state’s two-year rate go to: 

For your state’s three-year rate go to: 

The increase in defaults is of growing concern, particularly given that the National Center for Education Statistics reports that 11 percent of borrowers are at least 90 days delinquent in paying their student loans. Student loan payments may be nearly a year delinquent before they are considered in default.

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