NEW YORK – About one in seven borrowers defaulted on their federal student loans, showing how former students are buckling under higher-education costs in a weak economy.
The default rate, for the first three years that students are required to make payments, was 14.7 percent, up from 13.4 percent the year before, the U.S. Education Department said Monday. Based on a related measure, defaults are at the highest level since 1995.
The fresh data follows the announcement by the Obama administration that it would seek to restrain skyrocketing college expenses by tying federal financial aid to a new government rating of costs and educational outcomes.
The report covers the three years through Sept. 30, 2012. The default rate, which includes graduates and those who dropped out, shows the share of borrowers who haven’t made required payments for at least 270 consecutive days.
The rate doesn’t include those who are putting off payments through deferral or economic hardship called forbearance, or borrowers who are on federal income-based repayment programs, meaning it understates their hardship, O’Sullivan said.
U.S. borrowers owe $1.2 trillion in student-loan debt, surpassing all other kinds of consumer borrowing except for home mortgages.
Public colleges reported a 13 percent default rate while nonprofit private schools had a rate of 8.2 percent. For-profit colleges fared the worst, with a default rate of almost 22 percent.