student loans

2009 Student Loan Default Rate Jumped to 8.8% from 7.0%

A sign of the times. Student loans default rates for 2009 increased to 8.8% from 7.0%. For profit schools had the worst jump, from 11.6% to 15%. Private universities and colleges had the lowest, but also increased from 4.0% to 4.6%. Public higher education had a 7.2% default rate, up from 6.0%. These numbers are only for a two year time window. Defaults after that 24 month period are not part of this tally.

From the Department of Education:

The rates announced today represent a snapshot in time, with the FY 2009 cohort consisting of borrowers whose first loan repayments came due between Oct. 1, 2008, and Sept. 30, 2009, and who defaulted before Sept. 30, 2010. More than 3.6 million borrowers from 5,900 schools entered repayment during this window of time, and more than 320,000 defaulted.

Even more horrific these numbers had the new repayment option incorporated where one could scale and cap student loan payments based on their income.

Since the time when the borrowers in the FY 2009 cohort enrolled, the Obama Administration has expanded flexible loan repayment options for borrowers through the income-based repayment plan (IBR). This plan makes loan payments more affordable by capping the monthly payment at an amount based on income and family size.

These numbers are also after another policy change. Schools with high default rates are sanctioned and can lose eligibility for federal student loans. There were actually 5 schools cited in the press release with high default rates:

Looking like higher education doesn't pay after all

AP has cranked the 3 year default rate on government student loans and discovered a 21.1% default on for profit schools vs. a whopping 12% 3 year default rate from government student loans overall.

According to this Wikipedia article, 9% of all college students attend for profit schools. There is also an issue of transferring credits to a non-profit educational system, although some for profits have been accredited. A list of for profit schools is here.

Student Loan Bill Passes House - Private, "for profit" cut out

No more feeding off of desperate students. That's what the House said today in passing H.R.3221, the Student Aid and Fiscal Responsibility Act of 2009. In a huge screw you predatory lenders, from now on the government will be the sole provider of guaranteed student loans.

This is great news for students and should increase access to higher education, hopefully for older students as well.

Such House action is especially welcome since student debt increased 25% in just one year.

The Wall Street Journal:

Under the legislation, all lenders would be cut out of the market for originating loans. There would still be a role for private banks and lenders to bid for a limited number of contracts to service the loans after they are made by the government.

Student Debt up 25% from a year ago, while 33% of workers below age 35 live with parents

From the Wall Street Journal:

Students are borrowing dramatically more to pay for college, accelerating a trend that has wide-ranging implications for a generation of young people.

New numbers from the U.S. Education Department show that federal student-loan disbursements—the total amount borrowed by students and received by schools—in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion. The amount of money students borrow has long been on the rise. But last year far surpassed past increases, which ranged from as low as 1.7% in the 1998-99 school year to almost 17% in 1994-95, according to figures used in President Barack Obama's proposed 2010 budget.