The national cohort default rate for federal student loans dropped significantly for loans that entered repayment in 2015, according to new data from the Department of Education (ED). Still, a dozen institutions may be in danger of losing their eligibility to receive federal student aid due to high institutional default rates.
The annual data, publicly released on Wednesday, show that the national three-year default rate decreased from 11.5 percent for loans that entered repayment in fiscal year 2014 to 10.8 percent for loans that entered repayment in fiscal year 2015, a decrease of 6.1 percent. ED changed its formula for calculating cohort default rates several years ago to capture the percentage of loans in default three years after beginning repayment. Previously, cohort default rates followed loan repayment for two years.
The federal default rate captured in the new data measures the percentage of borrowers who entered repayment between Oct. 1, 2014 and Sept. 30, 2015 and subsequently defaulted prior to Sept. 30, 2017. During that time, more than 4.9 million borrowers entered repayment, compared with about 5 million during the previous cohort. Of the 4.9 million who entered repayment, 531,653 defaulted on their loans.
Individual institutions with default rates of 30 percent or higher for three consecutive years, greater than 40 percent for one year – or both – are subject to sanctions, including a loss of eligibility for one or more federal student aid programs. Under the new data, 10 institutions (seven proprietary schools, two public, and one private institution) are subject to sanctions, unless they successfully appeal to ED.
Broken down by sector, the cohort default rate decreased from 11.3 percent to 10.3 percent among public institutions, and from 7.4 percent to 7.1 percent among private nonprofit institutions. The cohort default rate increased slightly from 15.5 percent to 15.6 percent among for-profit institutions, which represent 38 percent of all institutions.
Overall, one public institution, two private nonprofit institutions, and nine for-profit institutions had default rates, making them subject to sanctions, unless they successfully appeal to ED.
Those schools are:
CA—Corona—Advance Beauty Techs Academy
FL—Oakland Park—Florida Academy of Health and Beauty
IL—Chicago—Larry's Barber College
KY—Cumberland—Southeast Kentucky Community and Technical College
MA—Worcester—Rob Roy Academy
NY—Niagara Falls—Cheryl Fell's School of Business
NY—Rochester—Sharp Edge Barber Institute
ND—Bismarck—United Tribes Technical College
PA—Lancaster—Champ's Barber School
PR—Saint Just—Theological University of the Caribbean
TN—Madison—Nashville Barber and Style Academy
WI—Beloit—First Class Cosmetology School
According to ED, five of those institutions were subject to sanctions for having a cohort default rate of 40 percent or more for one year, five are in jeopardy for having a default rate of 30 percent or more for three years, and two fell into both categories.
However, two of the institutions—Southeast Kentucky Community and Technical College and United Tribes Technical College—may be safe from receiving sanctions due to a provision written into the 2018 spending bill, which allows the Secretary of Education to give exemption to institutions in high-poverty areas.
Publication Date: 9/27/2018