Student Loan Default Rates Much Higher Than Expected

Man, going to college is rough these days. I'm not talking about pulling all-nighters or missing priority registration; I'm talking about finances. Tuition is steadily increasing, students are turning to food stamps so they can eat and student loan default rates are going through the roof. In fact, it just came out that way more students are defaulting on their loans than the government had previously estimated.

According to previously unpublished data obtained by the Chronicle of Higher Education, one in five government loans that entered repayment in 1995 has now gone into default, and the rate is even higher for two-year colleges and for-profit institutions (40 percent!). Those numbers represents thousands more individuals than the government previously thought who face significant economic disadvantages — they're now ineligible to receive additional federal aid, they could have their wages or tax refunds seized by the government, they face higher interest rates and their battered credit records could make it difficult to get a car, mortgage, credit card or job.

Poor students certainly aren't the only ones defaulting on their student loans, just like poor homeowners aren’t the only ones defaulting on their mortgages. Record high unemployment rates over the past few years have meant that all college students are facing some pretty lousy job prospects upon graduation, which, combined with an average debt load of more than $22,000, has been predictably disastrous.

But the situation is even worse for low-income students, since the odds are already against them when it comes to escaping poverty after graduation. The last thing poor students need is yet another statistic that's not in their favor — for instance, a 31 percent chance that they'll default on their student loans if they attend a community college. That is ... not very encouraging.

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