More people are defaulting on their student loans, as college graduates find it harder to get jobs, the U.S. Education Department reported Monday.
The default rate climbed to 7 percent for those whose payments began in fiscal 2008, up from 6.7 percent the year before. Faring worst of all, as usual, were students from for-profit colleges, for which the rate rose from 11 percent to 11.6 percent.
The rates rose from 5.9 percent to 6 percent for students from public institutions, and from 3.7 percent to 4 percent for those from private institutions, the Education Department said.
“Many students are struggling to pay back their student loans during very difficult economic times,” Education Secretary Arne Duncan said in a prepared statement.
The data represent 3.4 million borrowers whose first loan repayments came due between Oct. 1, 2007, and Sept. 30, 2008, and the 238,000 who defaulted before Sept. 30 of last year, the Education Department said. The data do not include those who defaulted after their first two years of repayment.
While the specific statistics are new, the fact that for-profits rank at the top is not; they have long led the education field in student loan debt and defaults, as highlighted in reports such as this. This year, however, for-profits have come under attack in Washington for allegedly sticking their youths with enormous debt, and the Education Department immediately used the new numbers to bolster its campaign to regulate the institutions further.
“While for-profit schools have profited and prospered thanks to federal dollars, some of their students have not,” Duncan said in his prepared statement. “Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use.”
The Career College Association, which represents many for-profit colleges, responded with a statement that the rise in defaults “reflects the current economic times and the financial well-being of the borrowers, not the quality of the institution.”
The Education Department’s proposed regulations include a requirement that in order to get access to federal student aid, the for-profit institutions must show that graduates can earn enough money to pay back their loans or that a certain percentage of their graduates are repaying their loans. For-profits are fighting implementation of the rule.
The for-profit colleges say their students tend to be more economically disadvantaged than those who attend other colleges, and that for-profit colleges are the nation’s most efficient form of higher education.