Student Loan Defaults Hit Highest Default Rate Level Since 1995
October 1st, 2013Via: Bloomberg:
About one in seven borrowers defaulted on their federal student loans, showing how former students are buckling under higher-education costs in a weak economy.
The default rate, for the first three years that students are required to make payments, was 14.7 percent, up from 13.4 percent the year before, the U.S. Education Department said today. Based on a related measure, defaults are at the highest level since 1995.
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The year 1995 jumps out at me and makes me question where they’re getting these numbers from.
Anecdotal evidence suggests they may just be massaging the numbers this year.
I was a student in 1995 when I started getting letters saying that I was in default. Each quarter I would go to the financial aid office and get a letter verifying that I was still in school and therefore could not be in default. This eventually led to major problems for me.
A few weeks ago I received a letter saying I was in default on a loan that has long since been paid in full. I suspect that I’m going to go out on a limb and guess that this statistical exaggeration regarding the default rate may be a tactic to get congress to agree to raise the interest rates allowed on student loans.
Of course, one major difference between 1995 and the present is the rise of for-profit “colleges” that are allowed to hand out federal money for certificate programs in massage therapy or cosmetology that could never be repaid with normal wages in those fields.