Student Debt Defaults Soar

October 1, 2013
CBS MoneyWatch  
student loan news

According to the U.S. Department of Education, the share of student loan borrowers who default within two years after starting repayment has risen to 10 percent, and the rate for people who default within three years is 14.7 percent.

The rates are even greater, 13.6 percent in two years and 21.8 percent in three years, among for-profit schools. These institutions, which have the highest average rates of defaults, have been criticized for offering costly educational programs to vulnerable consumers.

"The department will continue to work with institutions and borrowers to ensure that student debt is affordable," U.S. Secretary of Education Arne Duncan said. "We remain committed to building a shared partnership with states, local governments, institutions, and students -- as well as the business, labor, and philanthropic leaders -- to improve college affordability for millions of students and families." Some experts say the country's debt problems are even worse than the data suggests. For example, borrowers need to have missed nine months of payments before they are even considered "in default," which is a longer string of missed payments than commercial borrowers accept. The statistics also do not take into consideration those who are barely ahead of their obligations, or are keeping up with payments only intermittently. Many advocates have called on the government to allow refinancing at more favorable terms and to allow student debt to be discharged in bankruptcy proceedings.

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