Student Aid Fo Education Loan

That’s the conclusion of the Education Sector, which has released a study that focuses on lowering federal student loan default rates.

Student loan defaults are becoming a hot topic as a growing number of recent college graduates struggle to find jobs that pay a living wage. The most recent federal loan default rate is 6.7% which might not sound all that alarming.

That 6.7% rate, however, is a sugar-coated statistic. This official rate only examines a student loan default that occurs within a two-year period after the student loan payments begin. According to Ben Miller, a policy analyst at Education Sector, it often takes 14 months before the federal government even characterizes a record of nonpayments as a defaulted account.

When the time period is stretched to three years, the default rate jumps to 11.8%, which is a 76% increase.

Not surprisingly, for-profit schools occupy the epicenter of college debt crisis. Seven percent of students attend for-profit, higher-ed institutions, but they generate 44% of the federal loan defaults.

Among schools in the hall of shame is Clinton Junior College in South Carolina. Thirty percent of students graduated from the school in three years, while more than 36% of the borrowers defaulted on their student loans.

When evaluating schools, check on each institution’s student loan default rates. High rates can often mean that a school is packaging too many loans in financial aid awards and are not counseling students about managing their college debt.