September 24, 2014 -- New data released by the Department of Education show 14 percent of federal student loan borrowers are defaulting on their loans within three years of entering repayment. While the percentage of students who defaulted decreased from 14.7 percent last year to 13.7 percent this year, far too many borrowers struggle to keep their federal student loans in good standing.
High cohort default rates (CDRs) have implications both for the borrowers in default and the institutions that educated them. This is particularly problematic at low-cost, open access institutions where the default rate hovers around 20 percent, which leaves many schools questioning whether they can continue to offer federal loans to students.
In a recent survey by NASFAA, 60 percent of financial aid administrators and more than 200 community colleges surveyed said their institution has considered leaving the federal loan programs entirely because of high CDRs that could affect students’ access to Federal Pell Grants. NASFAA has put forward several policy recommendations that would stop penalizing students who attend low-cost institutions that serve high numbers of at-risk students.
“Cohort default rates provide a critical glimpse into the struggles some students and institutions face when tackling debt,” said Justin Draeger, president of the National Association of Student Financial Aid Administrators. “Targeted, consumer-tested information, giving schools additional authority to limit student debt, and more safeguards for borrowers, such as universal income-based repayment plans, will greatly help students to take on manageable debt and pay it back in a timely manner.”
NASFAA experts are available to discuss what the new data means for students and institutions, as well as the methods various colleges are employing to help their students better manage debt. Please email us at email@example.com or call (202) 785-6959 to set up an interview.
The National Association of Student Financial Aid Administrators (NASFAA) is a nonprofit membership organization that represents nearly 20,000 financial aid professionals at more than 3,000 colleges, universities, and career schools across the country. NASFAA member institutions serve nine out of every ten undergraduates in the U.S. Based in Washington, D.C., NASFAA is the only national association with a primary focus on student aid legislation, regulatory analysis, and training for financial aid administrators. For more information, visit www.nasfaa.org.
Publication Date: 9/24/2014