Will You Default on your Student Loans?

According to the U.S. Department of Education the two-year cohort default rates (CDRs) announced in Sep 28 2012:

“The two-year CDR increased over last year’s rates for both the public and private non-profit sectors, rising from 7.2 percent to 8.3 percent for public institutions, and from 4.6 percent to 5.2 percent for private non-profit institutions. CDRs decreased for for-profit institutions from 15.0 percent to 12.9 percent, though the sector still has the highest average two-year rate.”

The press release by the department of education paints a grim picture, and students need to be aware of the kind of loans they are taking upon themselves to fund their college education. but it’s not just accountability of the students, it is also the institutes who are borrowing the money who needs to be held accountable, and it is also the state of the economy, as unemployment rises,default rates will increase and vice versa.

Another interesting fact to notice about this report is that it only accounts for federal student loans in default. According to business insider there is there are $8.1 billion in defaulted private loans!

If the U.S government doesn’t want the student loan industry to sink the country and the world into a financial crisis like the mortgage industry did back in 2008 it needs to start taking action in the private loans sector as well and create more strict regulations.

The federal government is currently providing 6 options to help students repay their loans:

graduated repayment, extended repayment, income-based repayment, income-contingent repayment, income-sensitive repayment, and pay-as-you-earn repayment. You can read more about it here.

If you are considering a loan , it is best to conduct an extensive research and know what are your best options for the long run and not fall into lenders marketing tricks.

Best of luck!