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Number of Graduates Defaulting on Their Federal Loans Declines

A greater number of college graduates are repaying their federal student loan debts on time without defaulting on the loans, according to the latest stats released by the US Department of Education.

The student loan cohort default rate (CDR) which is the percentage of borrowers who defaulted prior to September 30, 2018, after entering repayment between 2015-2016, witnessed a decline of 6.5 percent in 2016 from the previous year.

The CDRs fell for different institution types including public, private, and proprietary schools. For public institutions, the default rate fell from 10.3 percent in 2015 to 9.6 percent in  2016. The rate for private institutions declined from  7.1 percent in  2015 to 6.6 percent in 2016 while proprietary institutions also witnessed an overall decline of 2.6 percent.

The Department has given nod to sanction 15 institutions for default rates equal to or greater than 30 percent by denying them participation in federal student aid programs.

“Eleven of these 15 schools are subject to a loss of eligibility based on a CDR of 40% or more for one year, while seven are subject to a loss of eligibility based on a CDR of 30% or more for three years. Three schools are subject to a loss of eligibility based on a CDR of 40% or more for one year and a rate of 30% or greater for three years,” the Department said in a release.

Studies have shown that student loans adversely impact students of color. Among black students, 55 percent of males and 45 percent of females default on their loans within 12 years of starting college. This number stands at 35 percent for both male and female Latino students.

The Department is planning to introduce new tools including a loan simulator that will make borrowers informed on effectively managing their student loans.

Student Loans Hampering Wealth Accumulation of Black Graduates

 

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