Default Rate on Federal Student Loans Rises Again
"The two-year default rate has climbed steadily for the past several years, and observers had mixed views of the latest increase, of three-tenths of a percentage point," the Chronicle of Higher Education reports. "'While it's too soon to tell whether this signifies a leveling-off of recent dramatic increases' in the cohort default rate, it is encouraging that the rate of increase has slowed, Justin Draeger, president of the National Association of Student Financial Aid Administrators, said in a written statement. Still, the statement added, it is an 'unsettling trend' that the default rate is now more than double its historic low—4.5 percent for the cohort that entered repayment in the 2003 fiscal year. Default rates, which are released annually, are important to colleges because they are a factor in eligibility for federal student-aid programs. Colleges are barred from receiving federal student aid if their two-year default rates are 25 percent or higher for three consecutive years or if they spike above 40 percent in a single year."
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