Defaulted Student Loans Rate and Federal Financial AidDefaulted student loans continue to rise and may soon affect federal financial aid availability for some schools.The data for the federal student loans default rate shows that overall it rose to 7%,in 2008 and jumped again to 8.8% in the latest released (Sept. 2011) data for 2010. It would have probably been much higher, but the reports only counted the borrowers who enter repayment and default within 2 years. But what should alarm anyone who is thinking of going to a for-profit school is this comparison: Student Loans Default by Institution Type
These figures from the Department of Education show that in 2008-2009, borrowers at for-profit schools accounted for 43% of of total student loan defaults. There are several reasons for this:
So, how does this affect federal financial aid? Right now, schools that have a default rate of 25% or more for three years in a row can lose their eligibility for federal aid. This year, two schools fall into that category- Charleston School of Beauty Culture in West Virginia, and Human Resource Development & Employment-Stanley Technical Institute of Clarksburg, also in West Virginia. Both are for-profit schools. Additionally, schools can lose their financial aid eligibility if their default rate is more than 40% for the latest data year. Cuttin' Up Beauty Academy in Denver, Colorado; Academy of Healing Arts in Las Vegas, Nevada; and Clinton Junior College in Rock Hill, S.C. are schools in this category. In Arizona, CollegeAmerica (Flagstaff), Arizona Automotive Institute (Glendale), Empire Beauty School-Paradise Valley (Phoenix), Lamson College (Tempe), Turning Point Beauty College (Casa Grande), and Tucson College (Tuscan) also have more than 40% default rates. The U.S. Department of Education now wants to enforce the "gainful employment rule" which has been ignored for 35 years (because no one could figure out or agree on how to quantify it). This provision says that schools must demonstrate that their students are prepared for “gainful employment in a recognized occupation". Many more for-profit schools will lose their federal financial aid funding with the new two-test plan that has been designed to find high default-risk schools and deny them access to these funds. If you are considering a for-profit school, first make sure it is listed in the federal school codes as an eligible school, and then check the default rate to make sure it is not at risk to lose this eligibility. Federal student loan debt help 
The number of defaulted student loans at a college can and should affect your plans to enroll there.return from defaulted student loans to federal student loans return to top of defaulted student loans, or return to college loan consultant home |
