Defaulted Student Loans – The Rising Issue of Concern

Defaulted Student Loans is the rising issue of concern that is baffling the current economic condition globally. Now, if you have been a student enrolled for higher education, chances are high that you have also taken a loan for financing your higher education. Unfortunately, in most cases, the borrower of the student loans fails to repay back the lender in a timely manner. Thanks to the ever-increasing rate of unemployment, finding a job just after graduation has come across as a challenging job for many. Lowering job prospects, increased tuition costs, and poor graduation rates have come together to increase the rate of defaulters with student loans sharply.

In recent news, the cohort default rate withstood a sharp rise to 8.8 per cent from the 7 per cent fiscal in 2008. The Department of Education of September 12, 2011 declared this figure introducing a sharp rise in defaulters. The overall increase drive was mostly influenced by students borrowing from the government to enroll for – profit colleges. It has been found out that almost 15 per cent of the one million students borrowers enrolled at the for-profit schools were lagging behind 270 days in their payments. This figure in Defaulted Student Loans is released after two years and witnesses a sharp increase from the last year’s 11.6 per cent.


Well, the rates of default as declared on the report for public institutions are also no less. These institutions witnessed a rise to 7.2 per cent from 6 per cent. Students enrolled at not-for-profit colleges -the private institutions recorded the defaulted rate at 4.6 per cent from last year’s 4 per cent. The figures that were released also disclosed that around 3.6 millions borrowers have got into repayments in fiscal 2009. The figures of Defaulted Student Loans were recorded to be more than 320,000, which witnesses a rise of 80,000 from the previous year. All the sectors in the education sector have recorded a steep rise in defaulters when compared to last year.

Finding the reports to be troubling, the Department of Education has already started contemplating alternatives to fight the situation better. The U.S government has started an income based repayment plan that determines federal loan payments at 15 per cent of the flexible income. Moreover, the new regulations that has been put up by the government administrations has forced the for-profit sector to intimate their proprietary colleges to turn to stricter measures of enrollment along with closing the failing programs. It has been ensured that if the issues can be handles with care, the rising rate of Defaulted Student Loans is sure to hit a low phase in the coming years.

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