Student Loan Defaults Surge To Highest Level In Nearly 2 Decades
Recent college students are defaulting on federal loans at the highest rate in nearly two decades, reflecting “crisis” levels of student debt and a lackluster economy that leaves graduates with bleak employment prospects.
One in 10 recent borrowers defaulted on their federal student loans within the first two years, the highest default rate since 1995, according to annual figures made public Monday by the Department of Education.
A separate gauge, measuring defaults occurring within the first three years of required payments, showed that more than one in seven borrowers with federal student loans went into default, an event that can trigger invasive debt-collection methods that include fees, wage garnishments, and withheld IRS tax refunds.
“The growing number of students who have defaulted on their federal student loans is troubling,” Education Secretary Arne Duncan said. Duncan said the department will work to “ensure that student debt is affordable.”
Taxpayers hand out “treats” to struggling borrowers in the form of debt-relief programs, but many who have defaulted may be unaware of these bail-out options.
To ensure that students are aware of the flexible income-driven loan repayment options available through Federal Student Aid (FSA), this fall the Department will expand its outreach efforts to struggling borrowers to inform them about the different plans. The Department has also released new loan counseling tools to help students and families make more informed decisions about planning for college. Students and families can visit www.studentaid.gov for more information.
- Not enough borrowers take advantage of Income Based Repayment’s ‘mind-boggling’ generous benefits (Cost of College)
- Income Based Repayment (IBR) is a ‘moral hazard’ for high-income student loan borrowers (Cost of College)