By RACHEL GROSS
Defaulting on student loans is a serious matter, and The Chronicle of Higher Education has recently unearthed data finding that students are defaulting at rates far higher than previously thought. In an article on Sunday entitled “Government Vastly Undercounts Defaults,” The Chronicle studied numbers on the repayment of student loans going back 15 years, finding that defaults only increased over time.
Especially alarming were the numbers for two-year and for-profit colleges, with 40 percent of students who borrowed loans to attend for-profit institutions defaulting since 1995. This data comes just when for-profit colleges are being subjected to federal scrutiny in part because of the amount of federal financial aid they draw and the amount they spend on expenses other than teaching. “While for-profits educate less than 10 percent of students, those colleges’ students received close to a quarter of Pell Grant and federal-student-loan dollars in 2008,” according to the Chronicle article.
In 2009-10, the average for-profit charged about $14,000 in tuition and fees while the average community college charged about $2,500. In total, $50.8 billion worth of loans were in default by the end of the 2009 fiscal year, compared with $39.1 billion at the end of the 2008 fiscal year.
As the article points out, defaulting on student loans can create a variety of difficulties for borrowers, including making them unable to receive further federal aid and less likely to get loans, credit cards and jobs. They also face higher interest rates, and the government may take repayment money from their paychecks and taxes.