Student loan default rates have fallen across the country, according to the U.S. Department of Education, marking the first time in seven years that the rates have decreased.
About 13.7 percent of students nationwide who entered the repayment process for their loans between October 2010 and September 2011 (the 2011 fiscal year) defaulted on their loans, meaning that they failed to make their payments on time. This marks a drop of one percent from 14.7 percent for students in the 2010 cohort.
Under federal law for student loans, default rates for student loans are calculated in three-year periods. The U.S. Department of Education measured the number of students, among those who began repaying their debts in 2011, who immediately defaulted on their payments within the three-year period of 2011 to 2014.
“The phrase ‘cohort default period’ refers to the three‐year period that begins on Oct. 1 of the fiscal year when the borrower enters repayment,” Renee Pelletier, Stony Brook University’s Office of Financial Aid’s senior financial aid advisor, said in an email.
For SBU students, the default rate remained below the national average, with a drop from a 5.3 percent rate for the 2010 fiscal year to a 5.1 percent rate for the 2011 cohort, according to the U.S. Office of Federal Student Aid. Stony Brook’s rates are well below the national average for public universities, according to statistics from the U.S. Office of Federal Student Aid.
Among public schools, the percentage of students who failed to make payments on their loans dropped from 13 percent for the 2010 fiscal year cohort to 12.9 percent for the 2011 cohort, according to the U.S. Department of Education.
At Stony Brook University, a total of 4,158 students entered the repayment process in 2011, approximately 14.1 percent of those enrolled. Among the 4,158 students, a total of 215 defaulted in the three years.
The low rate of default for students from Stony Brook University helps protect the university from federal scrutiny for schools with a default rate of over 30 percent or more for three consecutive years. Schools with high default rates are at risk of federal sanctions that can lead to a loss of eligibility in federal student aid programs, according to the Department of Education’s website.
This is the first year that the three-year default rate was solely used to determine the number of students who defaulted on their debt. Previously, default rates were calculated within two-year periods, but changes to Higher Education Opportunity Act in 2008 required that the federal government now calculate default rates within three-year periods.
Long Island Congressman Timothy Bishop and other cosponsors of the amendments said during floor debate that a three-year time period would provide a more realistic assessment of default and that this change was inspired by the series of years that saw increases in national default rates and raising fears of the economic stability of college graduates.
The federal default rate has been used to assess higher education and the value of college degrees in the country. Defaults have become a major issue for the federal government due to the consequences that are placed on those that miss a payment on their loan.
Missing a payment leads to a student’s loan being considered delinquent, which damages a person’s credit rating, making it harder to obtain car loans or credit cards, increases the amount of debt due to late fees that are collected by loan collectors and leads to a student losing eligibility for any further federal student aid, according to the U.S. Office of Federal Aid.
Due to these consequences, universities across the country have begun providing their students resources to learn about default, Pelletier said.
“All students who have borrowed a loan while at Stony Brook are notified when they leave that they must complete Exit Counseling… [an] online session goes in depth about when and how repayment occurs,” Pelletier said in an email. “The Office of Financial Aid and Scholarship Services is in the process of launching a new website [with] a section dedicated to responsible borrowing.”
