Defaults on student loans up

The default rate on U.S. student loans rose to 7 percent in the year ended Sept. 30, 2008, as the economy worsened globally, according to the most recent Education Department data.
The for-profit college sector had the highest default rate, rising to 11.6 percent, the department said last week in a statement. The overall annual rate of student-loan defaults climbed from 6.7 percent in the same period a year earlier, according to the statement.
The Education Department yardstick measures the percentage of borrowers who default during the first two years of required repayment. The measurement is used to determine which schools will remain eligible to participate in U.S. student aid programs. Default rates among for-profit college students were almost twice the 6 percent found at public nonprofit colleges and almost three times the 4 percent rate at private nonprofits, according to the statement.
“While for-profit schools have profited and prospered thanks to federal dollars, some of their students have not,” Education Secretary Arne Duncan said in the statement. “Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use.”
The increase in default rates at for-profit colleges showed the effects of the economy on low-income students, said Harris Miller, president and chief executive officer of the Career College Association, a Washington-based industry group.
Studies show that “individuals with fewer financial resources have a harder time repaying loans, whether in private sector colleges and universities, community colleges, or other types of higher education institutions,” Miller said in an e-mailed statement. •