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While most prospective college students largely focus on financial aid, academics, accreditation, admission requirements, work flexibility, and campus location when selecting a school, it is also important for students to consider student loan default rates in their search as well.
As if there is not enough to worry about when choosing the right college to meet your needs for four or more years, recent studies indicate that student loan default rates are one of the most important statistics to inspect closely when making a decision on higher education.
In order to ensure you make the right choice, read on to learn more about why student loan default rates matter so much and how you can protect yourself from selecting any institutions that may be hazardous for your financial well-being in the future.
Current State of Student Loan Default Rates in America
As the sticker price for a college education continues to rise, it is no surprise that students are forced to borrow more money from the government to afford achieving their higher learning dreams. Since more recent college graduates are entering a slowly recovering job market with mountains of accumulated loan debt, student college loan default rates have nearly doubled in the United States in the past decade.
While student loan debt has reached the $1 trillion mark countrywide, the three-year default rate across the nation has exceeded 13 percent. In fact, student default rates are higher than graduation rates at 514 universities in America!
With the federal government constantly contemplating raising interest rates, it is becoming even more concerning than ever before for students to have a sound financial plan for taking out loans.
Why Student Loan Default Rates Are Important
Student loan default rates are a vital statistic that demonstrate the percentage of an institution’s federal student loan borrowers who enter repayment in a particular fiscal year and default on their payments within two or three years. According to the U.S. Department of Education, a loan is considered to be in default when the borrower is at least 270 days behind on payments. Since the rate shows the percentage of graduates that are delinquent in paying back their loans, high student loan default rates is a great indicator of an institution’s performance. Schools with a high default rate are most likely producing unqualified graduates who were unable to receive good financial aid, are burdened by too much debt, and/or are unable to find jobs in their chosen field.
How to Find Your School’s Student Loan Default Rates
Having a very high student loan default rate often signifies that students have a higher probability of defaulting on repaying their student loans than actually completing the degree program and finding quality employment after graduation. Therefore, it is essential that you beware the colleges and universities nationwide that have consistently reported higher than average default rates on student loans.
While many schools may print their statistics right on their college website, others may be a bit sneakier in reporting their performance indicators to prospective students. In order to get information about student borrowers’ default rates, use the College Navigator from the National Center for Education Statistics to search for your potential institutions and discover the percentage of students currently in default on their loans.
Overall, rising student loan default rates nationwide can make it extremely difficult for students to maneuver through the tricky waters of financing their education. However, there are many ways that you can prevent becoming part of an institution’s default statistics. Along with choosing a career path that has good prospects in the current economy and building marketable skills that will translate well to today’s workforce, be sure to always inquire about a college’s student loan default rate to ensure you are making the right decision for a bright financial future.
