It is probably no surprise that more and more people are defaulting on their student loans during these economically difficult times. Unemployment rates are rising and without a quality job, most people will not be able to pay back their student loans. This article looks at the issues contributing to the defaults of student loans.
In 2009, 8.8 percent of people defaulted on their student loans. This number is up 1 percent from the previous year. One interesting part about the defaulting of loans is that they are not consistent between non-profit and for-profit schools. The for-profit school have a much higher default rate than non-profit institutions. This could be for a variety of reasons. One big reason is the possibility of fraudulent recruiting practices in the for-profit sector. For profit schools have a proportionately high loan rate. These loans are taken out and must be paid back regardless if the student graduates or not. The school gets paid and the lender gets stiffed. The second reason is the current unemployment rate. If you don’t have a job, you’re probably not going to pay off your loans.
Some schools are actually losing federal aid eligibility because of high default rates. In 2011, five institutions will lose eligibility because their default rates exceeded 25% for over three years.
The student loan default situation is definitely an issue that needs to be looked at more in-depth. The problem is not going to be a quick fix. The default rate stems down from other economic problems that should probably be dealt with first. Unemployment rates need to drop significantly in order for recent graduates to obtain a career that will actually allow them to pay back their loans.
In 2009, 8.8 percent of people defaulted on their student loans. This number is up 1 percent from the previous year. One interesting part about the defaulting of loans is that they are not consistent between non-profit and for-profit schools. The for-profit school have a much higher default rate than non-profit institutions. This could be for a variety of reasons. One big reason is the possibility of fraudulent recruiting practices in the for-profit sector. For profit schools have a proportionately high loan rate. These loans are taken out and must be paid back regardless if the student graduates or not. The school gets paid and the lender gets stiffed. The second reason is the current unemployment rate. If you don’t have a job, you’re probably not going to pay off your loans.
Some schools are actually losing federal aid eligibility because of high default rates. In 2011, five institutions will lose eligibility because their default rates exceeded 25% for over three years.
The student loan default situation is definitely an issue that needs to be looked at more in-depth. The problem is not going to be a quick fix. The default rate stems down from other economic problems that should probably be dealt with first. Unemployment rates need to drop significantly in order for recent graduates to obtain a career that will actually allow them to pay back their loans.
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