Financial Aid Experts Available To Discuss Downward Trend in Federal Student Loan Default

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NASFAA Advises Students to Take Heed and Be Wary of Borrowing More Than Necessary

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Though the default rate is trending downward, NASFAA urges students and parents to set themselves up for success in repayment by frequently reviewing their loan amounts to ensure they are only borrowing what is absolutely needed.

New cohort default rate (CDR) data released today by the Department of Education (ED) show that, for the second year in a row, the number of federal student loan borrowers who are defaulting on their loans within three years of entering repayment has decreased. Though the default rate is trending downward, the National Association of Student Financial Aid Administrators (NASFAA) urges students and parents to set themselves up for success in repayment by frequently reviewing and assessing their loan amounts while the student is enrolled to ensure they are only borrowing what is absolutely needed.

Federal student loan borrowers typically must begin repaying their loans six months after they graduate or leave school. Default occurs when a borrower does not make a payment for 270 days, or roughly 9 months. Each year, ED calculates the percentage of borrowers who default within a certain period of time for each school that participates in the federal student loan program.

The data released on Monday to schools and today to the general public, show that the default rate for students who entered repayment in 2012 and defaulted by September 30, 2014, is 11.8 percent– down from the 13.7 percent rate for students whose loans went into repayment in 2011. However, there is still more that can and should be done to keep greater numbers of students out of default.

“Far too many borrowers struggle to keep their federal student loans in good standing and it is extremely difficult to get them discharged in bankruptcy,” NASFAA President Justin Draeger said. “We advise struggling borrowers to bring their loan related questions to the trained counselors working in their institution’s financial aid office to help them find existing solutions to keep their loans in good standing.”

High CDRs also have implications for the institutions where defaulted students were previously enrolled. NASFAA has put forward several policy recommendations that would stop penalizing students and administrators at low-cost institutions that serve high numbers of at-risk students, including:

Cohort default rates (CDRs) provide a good jumping-off point on understanding how student loan debt can adversely affect students and institutions. NASFAA experts are available to discuss what the new data means for students and institutions, as well as the methods various colleges are employing to help their students better manage debt. Please email us at news(at)nasfaa(dot)org or call (202) 785-6959 to set up an interview.

About NASFAA

The National Association of Student Financial Aid Administrators (NASFAA) is a nonprofit membership organization that represents more than 20,000 financial aid professionals at nearly 3,000 colleges, universities, and career schools across the country. NASFAA member institutions serve nine out of every ten undergraduates in the United States. Based in Washington, D.C., NASFAA is the only national association with a primary focus on student aid legislation, regulatory analysis, and training for financial aid administrators. For more information, visit http://www.nasfaa.org.

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Erin Timmons
NASFAA
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