Higher Debt: Education Department reports student loan default rates jumped in 2008
“You can lead a boy to college but you can’t make him think,” philosopher Elbert Hubbard once said. According to a report the Department of Education released on Monday, you can’t make him pay for it, either.
The student loan default rate jumped from 6.7 percent in 2007 to 7 percent in 2008, according to data released today by the Department of Education.
“The default rate announced today — the most recent data available — is a snapshot in time, representing the cohort of borrowers whose first loan repayments came due between Oct. 1, 2007 and Sept. 30, 2008, and who defaulted before Sept. 30, 2009,” reads a statement on the department’s website.
The new numbers paint a rather alarming picture. While Education Secretary Arne Duncan and Sen. Dick Durbin have expressed concerns that the for-profit sector is plagued by high dropout and default rates, nonprofit universities also saw their number spike in 2008. Default rates went from 5.9 to 6 percent at publicly funded colleges and universities, from 3.7 to 4 percent at private nonprofit colleges and universities, and from 11 to 11.6 percent for for-profit institutions.
Despite an increase in default rates across the board, Duncan used the release of the new numbers as an opportunity to swing hard at for-profits that have engaged in aggressive and predatory recruiting tactics.
“While for-profit schools have profited and prospered thanks to federal dollars, some of their students have not. Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use,” Duncan was quoted as saying in the press release. “This is a disservice to students and taxpayers, and undermines the valuable work being done by the for-profit education industry as a whole.”
Duncan touted new rules aimed at for-profit colleges, which the department and congressional Democrats hope will encourage more ethical recruiting practices and a reduction in the default rate.
Meanwhile, no ground has been made in addressing the factors that have caused college tuition to outpace inflation. And it almost goes without saying that student loan default rates at nonprofit colleges and universities, while increasing, aren’t high enough to inspire politicians and bureaucrats to wade into the policy quagmire of federal subsidies.
“This won’t stop until Congress gets rid of this special treatment of student loan debt,” Market Ticker editor Karl Denninger told The Daily Caller last week. “It’s unconscionable that we don’t teach kids that they have to do a dispassionate financial analysis for these things. You could not sucker people like this if they understood these rules. Loans that are given have to be given based on ability to pay.”