White House Reveals Student Loan Default Rate

At the end of 2014, the New York Fed reported a surprisingly high delinquency rate for student loans – 11.3%. Now the latest data released by the White House reveals that number may in fact be dramatically higher. As the Wall Street Journal reports:

New figures covering more than 3,700 schools were released as part of the White House’s College Scorecard, which allows consumers to explore data about debt and degrees. The average repayment rate among almost 1,200 for-profit schools—meaning these students were actively paying off loans—was 61%, the lowest of any sector. The average repayment rate among all colleges was 73%.”

If 73% of college loans are being repaid, that means about 27% are not, which is far more than double the 11.3% the Fed reported last year.

And that’s just the average. 347 of the schools in the White House’s report (almost 10% of the institutions) reported that more than half of their students have defaulted or never made a payment on their loans after 7 years.

Learn about the dire effects this trend will have on the United States economy in our free special report – The Student Loan Bubble: Gambling with America’s Future.

Why are so many students simply not paying back their loans? One key reason is that they simply cannot afford the payments. Many college graduates today end up in jobs that would have been dominated by high school graduates a decade ago. Peter Schiff has talked a lot about this trend.

Another reason defaults are so rampant could be due to serious advice to students to simply stop paying, as Lee Siegel recommended in the New York Times this past summer. Siegel blames the problems on greedy colleges, rather than wondering at the government guarantees to lenders that make it easy for unqualified students to get these loans in the first place. Siegel suggests that while your credit may be terribly damaged, a graduate can ultimate survive a default.