Saturday, September 29, 2012

US Student Loan Default Rate Hits 13.4% (FY 2010 3-Year Cohort Default Rate)

Student loan default rates were released by the U.S. Department of Education on Friday, and they are at levels not seen since the mid-1990s.

Ed.gov reported that the FY 2010 official 2-year cohort default rate hit 9.1%, up from 8.8% for FY 2009. And the FY 2009 official 3-year cohort default rate hit 13.4% (the first official 3-year cohort default rate), which was "a slight decrease from the trial three-year rate of 13.8 percent for the FY 2008 cohort." Total student debt outstanding broke above $1 trillion at the beginning of the year.

Here's an interesting data point from the release. Excluding Puerto Rico, Arizona had the highest 2-year and 3-year student loan default rates in the country. Its 2-year default rate was at 15.3% (52,393 borrowers in default / 340,500 borrowers that entered repayment cycle) and its 3-year default rate was at 22.9% (63,881 / 277,835). They also compared default rates by sector (public vs. private).

First, here is how the U.S. Department of Education calculates the cohort default rate.

  • "The cohort default rate is the percentage of borrowers who enter repayment in a fiscal year and default by the end of the next fiscal year.
  • The Department issues default rates according to the fiscal year that borrowers entered repayment. For example, the fiscal year 2010 default rate is based on students that entered repayment between 10/1/2009 and 9/30/2010. The Department publishes default rates approximately two years after the fiscal year that students enter repayment.
  • The Department issued the first national default rates for fiscal year 1987 in calendar year 1989. Direct loan data was included for the first time with the fiscal year 1995 rates.
  • Effective July 1, 2010, schools are no longer eligible to make FFEL Loans.
  • In accordance with the Default Prevention and Management Initiative, the Department imposed congressionally mandated sanctions for the first time with the release of the fiscal year 1989 rates in calendar year 1991. Nearly 1,200 schools have lost student loan program eligibility since the beginning of the Default Management Initiative.
  • The fiscal year 2010 rate included 5,958 schools. There has been an increase in the FY 2010 cohort default rate over last year's rate." (source: ed.gov)


FY 2009 3-year Student Loan Default Rates and Trends (first official 3-year rates)


1) FY 2009 3-Year Official Cohort Default Rates by State (source: ed.gov)




2) FY 2009 Official National 3-Year Cohort Default Rates (Calculated August 5, 2012, source: ed.gov)



3) FY 2009 3-Year Official National Cohort Default Rates by Sector (source: ed.gov)



FY 2010 2-year Student Loan Default Rates and Trends


1) Trend of FY 2010 2-Year Official National Student Loan Default Rates Since 1987 (source: ed.gov)



2) Cohort Default Rates Comparison for FY 2010 2-Year FFEL (Federal Family Education Loans), FDSLP (Federal Direct Loans), and National (source ed.gov)



3) Comparison of 2-Year Official National FY 2010 Cohort Default Rates by Sector vs. the Prior Two Official Calculations (source: ed.gov)



*4) FY 2010 2-Year Official Cohort Default Rates by State (source: ed.gov)




Other interesting articles on the student debt and employment crisis:

Student-Loan Defaults Mount Again (Wall Street Journal)

College students defaulting at record rate (USA Today)

America's hidden unemployed: too discouraged to count (Reuters)

U.S. Grads Work As Waiters While Italy’s Remain Jobless (Bloomberg)

A Record One-in-Five Households Now Owe Student Loan Debt; Burden Greatest on Young, Poor (Pew Research Center)

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