ED Releases Cohort Default Rate Data For PLUS Loans

By Brittany Hackett, Communications Staff 

Despite a dramatic increase in the last several years, borrowers of federal Direct PLUS Loans have lower three-year cohort default rates (CDR) than their counterparts in the Stafford Loan Program, according to data released the week before last by the Department of Education (ED). 

The data was released during a negotiated rulemaking session on Program Integrity and Improvement after negotiators requested more data on the program’s default rates. The negotiators are reconsidering the current definition of adverse credit for PLUS borrowers. 

According to the data released by ED, the overall 2010 three-year CDR for PLUS borrowers entering repayment after in-school deferment is 1.0 percent for graduate PLUS borrowers and 5.1 percent for parent PLUS borrowers. 

To compare, the national three-year CDR for the Stafford Loan Program was for fiscal year (FY) 2010 was 14.7 percent. 

The chart below illustrates the CDRs for each group of PLUS borrowers broken down by institution type and when they entered repayment. During negotiations, ED offered two qualifiers about this data. First, PLUS volume has grown dramatically since 2008, so the bulk of outstanding PLUS loans are not yet reflected in default rates. Second, the default rates include both PLUS loans made under the Direct Loan program and those made under the former Federal Family Educational Loan (FFEL) program. This is significant since lenders under the FFEL program were permitted to use more stringent credit criteria than that used in the Direct Loan program.

3-Year Cohort Default Rates 

FY 2006 

FY 2007 

FY 2008 

FY 2009 

FY 2010 

Grad PLUS Proprietary

1.6%

2.2%

1.6%

1.8%

1.5%

Grad PLUS Private Non-Profit

0.4%

0.6%

0.8%

0.8%

1.0%

Grad PLUS Public

0.0%

0.6%

0.6%

0.6%

1.0%

Parent PLUS Proprietary

4.7%

5.5%

6.3%

8.3%

13.3%

Parent PLUS Private Non-Profit

1.2%

1.6%

2.0%

2.5%

3.4%

Parent PLUS Public

1.2%

1.6%

1.9%

2.2%

3.1%

In addition ED released data on the average debt levels of PLUS loan borrowers, both graduate and parent:

School Sector 

Total Balance 

Average Total Balance 

Percentage of Total Borrowers 

Percentage of Total Balance 

Public 2 Year

$448,442,488

$6,660

1.7%

0.4%

Public 4 Year

$34,739,546,813

$20,835

42.0%

34.7%

Private Non-Profit 2 Year

$116,288,027

$9,724

0.3%

0.1%

Private Non-Profit 4 Year

$50,733,622,798

$34,347

37.2%

50.7%

Proprietary 2 Year

$2,843,434,611

$8,486

8.4%

2.8%

Proprietary 4 Year

$7,823,344,838

$21,347

9.2%

7.8%

According to data for the 2013-14 academic year to date, 42 percent of PLUS loan applications -- both parent and graduate -- for public schools were denied after their credit check, with the rate dropping to 35 percent following the override process. Applicants in the private sector had declination rates of 35 percent, followed by 27 percent after overrides. Proprietary school applicants had declination rates of 48 percent before overrides, which dropped to 41 percent after. 

Declination reasons have varied over the last several years, but the data indicates that ED's decision in 2011 to begin including unpaid collection accounts and charge-offs in its review of applicants' credit history has had a significant impact on declination rates of PLUS loans. For the 2013-14 year to date, the top two out of five reasons loans were denied were because the applicant had an account in collection or had a charge-off. According to the data the other main reasons loans were denied was because applicants were 90 days or more delinquent on a debt; had filed for Chapter 7, 11, or 12 bankruptcy; or had a defaulted loan which had been claim paid. 

ED also released several pages of data on the remediation rates. In the data, ED defines remediation as denied PLUS loans that are approved due to an appeal or endorsement, and additional unsubsidized loans that are awarded to the dependent student in lieu of the parent PLUS loan after the PLUS has been denied. Several non-federal negotiators in the recent Neg Reg session pointed out that unsubsidized loans should not be included in the remediation data, since they are not PLUS loans and the amount of the unsubsidized loan offered is often much lower than the amount applied for under the PLUS program. 

During academic year 2013-14, the total combined credit check denial remediation rate for parent PLUS borrowers at two- and four-year public schools was 81 percent and the rate for grad PLUS borrowers was 46 percent. Parent PLUS borrowers at private schools had a total remediation rate of 80 percent and graduate PLUS borrowers in the same sector had a rate of 59 percent. Borrowers at proprietary schools had rates of 70 percent for parent PLUS borrowers and 38 percent for graduate PLUS borrowers.

 

Publication Date: 4/7/2014


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