Defaults Edge Higher

WASHINGTON — Student loan default data released Monday by the U.S. Department of Education served only to stoke the flames of debate over for-profit colleges and their students’ debt levels, as the default rates for the sector grew more dramatically than those of public and private institutions.

The nationwide two-year cohort default rate for loans that came due between Oct. 1, 2007 and Sept. 30, 2008 — the federal government’s fiscal year 2008 — was 7.0 percent, up from 6.7 percent in 2007. In all, 238,852 loans out of close to 3.4 million that entered repayment during fiscal 2008 were defaulted on by the end of September 2009, the department reported. The default rate rose most rapidly at for-profit colleges, from 11.0 percent in 2007 to 11.6 percent in 2008. At public institutions, the overall default rate increased from 5.9 to 6.0 percent, and at private institutions, from 3.7 to 4.0 percent.

Education Secretary Arne Duncan said the increased frequency of defaults was to be expected given the U.S. economy’s prolonged slump. “This data confirms what we already know: that many students are struggling to pay back their student loans during very difficult economic times,” he said in a statement. The national default rate was the highest it has been since 1997, when 8.8 percent of more than 2.1 million borrowers defaulted on their loans. The total number of defaults in the two-year calculation window was the greatest it has been since 1992, when there were just under 300,000.

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