$50.8 Billion in Student Loans in Default
The rate of borrowers who will default on student loans is higher than short-term government estimates indicate, reports the The Chronicle of Higher Education. According to their data, 20 percent of government loans that started repayment in 1995 have gone into default. The rate is even higher for students attending two-year colleges.
Defaulting on student loans leads to serious personal and financial burdens. Borrowers become ineligible for additional federal aid and can have their wages and tax refunds seized by the government. It also ruins future credit ratings, making it difficult to obtain mortgages, car loans or credit cards.
Loan money that is not recovered by the government must come from taxes. At the end of the 2009 fiscal year, $50.8 billion of student loans were in default.
For-profit institutions are being submitted to a congressional investigation, which will examine the cost and quality of the education they provide. After 15 years of repayment, 40 percent of students attending for-profit schools default on loan payments. Although only 10 percent of college students attend for-profit educational institutions, these students make up a quarter of Pell Grant and federal student loan recipients.
The Career College Association of for-profit colleges cites socio-demographic differences to account to the low rate of loan repayment. “Four-year public and nonprofit colleges and universities have more affluent populations,” Harris N. Miller, the association’s president. “Four- and two-year career colleges have less affluent populations.”
However, those who represent community colleges point to the fact that their students borrow much less and serve a similar demographic. The data points to concerns about the rising costs of higher education.
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