Student Loan Defaults are Highest in Arizona, Largely Due to For-Profit College

Arizona had both the highest number of people who defaulted on their federal student loans in 2009 as well as the highest percentage, according to data released Monday by the U.S. Department of Education.

According to the Education Department’s official fiscal year 2009 national student loan cohort default rate, 44,216 of the 276,057 borrowers of federal student loans credited to Arizona were in default. The number of student loan defaults in Arizona was more than twice as high as the second- and third-highest states — California had 21,529 defaults and Texas had 21,405. Arizona’s ratio of defaults (16.6 percent) was 40 percent higher than the next closest state (Arkansas, which recorded 11.6 percent) and 14 percent higher than the ratio of defaulting students in Puerto Rico (14.5 percent).

Arizona’s percentage of student loan defaults was almost twice the national rate of 8.8 percent.

Education Department officials said that one likely reason for the high default rates in Arizona was the presence of the University of Phoenix. Arizona is home to the for-profit college giant, which enrolls students from all over the country. According to the Education Department’s report, for-profit colleges had by far the highest student loan default rate among postsecondary institutions. For-profit colleges recorded a default rate of 15 percent in 2009, an increase of almost a third from the previous year’s rate of 11.6 percent. The default rate at public colleges was 7.2 percent, up from 6 percent in 2008, while the rate at private nonprofit schools was 4.6 percent, up from 4 percent the year before.

University of Phoenix spokesman Chad Christian blamed the economy for the high number of defaults and their dramatic increase from last year.

“Colleges and universities throughout the country saw an increase in default rates, as many working Americans were finding it increasingly difficult to make ends meet,” Christian said in a statement. “As always, we are committed to helping our students understand and manage financial aid debt levels, and we continue to make significant investments in technology, learning and preparation to help our students succeed” (“Arizona Student-Loan Defaults Are Highest in the Nation, Report Shows,” Cronkite News, Sept. 12, 2011).

The Association of Private Sector Colleges and Universities, a national membership group representing for-profit schools, said it was “disappointed” to see that default rates had climbed. The association also singled out the economy as the problem.

Deputy Undersecretary of Education James Kvall said that while the poor economy was a significant factor in rising default rates, he also blamed the increase on the growth of for-profit colleges.

Overall, the number of borrowers with federal student loans due increased from 3.3 million in 2007 to 3.6 million in 2009. The number of federal student loans in default also increased, from 225,371 to 320,194.

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