Student loans default rate drops

The U.S. Department of Education announced Wednesday a national drop in the default rate on federal student loans — and though UNC’s rate remained low overall, the University experienced an increase in its default rate.

The average default rate for public institutions was almost flat, moving from 13 percent in 2010 to 12.9 percent in 2011. But UNC’s rate increased from 1.6 percent to 2.3 percent in 2011, an overall 44 percent increase.

When a student borrower fails to make loan payments for nine straight months within the first three years after graduation, he or she defaults on the loan.

The national average rate dropped to 13.7 percent in 2011 from 14.7 percent in 2010 for all sectors of higher education, including public, private and for-profit institutions.

“While it’s good news that the default rate decreased from last year, the number of students who default ... is still too high,” Department of Education Secretary Arne Duncan said in a statement.

Colin Seeberger, spokesman for the student advocacy group Young Invincibles, said there’s no reason to celebrate.

“Anyone popping the cork off of the champagne bottle after this week’s announcement doesn’t understand the magnitude of the student debt crisis we face,” he said in an email. "The marginal drop in the default rate doesn’t change the fact that we have more borrowers in default today than we did last year — 650,000 versus 600,000 the year before.”

Private non-profit institutions like Duke University saw rates decline 8.2 percent to 7.2 percent. For-profit schools like the University of Phoenix dropped 21.8 percent to 19.1 percent.

Six for-profit colleges accounted for 14 percent of all federal student loan defaults in 2011.

Seeberger said the 13.7 percent overall default rate does not account for the total number of federal student loan borrowers in default — it only accounts for the proportion that defaulted within three years of graduation.

Kristin Anthony, assistant director of the federal direct loan programs at UNC, said the Office of Scholarships & Student Aid has not discussed the increased default rate.

The University is limited in its role during the loan repayment process, she said, though UNC does try to educate students about repaying loans.

Loan providers such as FedLoan Servicing, Sallie Mae, Nelnet and Great Lakes have a vested interest in keeping students out of default because they get evaluated — and could potentially lose their servicing contract if they do not work hard enough to help students to enter into repayment, Anthony said.

She said there are seven repayment options, including those that consider students’ income.

" Let the servicer know that they cannot make the repayment and attempt to come up with any possible way to begin a repayment no matter how small it might be,” Anthony said in an email. “ Avoiding the servicer is the very worst move to make.”

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