International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Thursday, September 25, 2014

25% student loan borrowers 90 days behind, 13.7% in default

Wall Street Journal article

About one in seven borrowers who left college or graduate school in the fiscal year ended September 2011 had defaulted on their student loans within three years, the department said Wednesday. The official figure—13.7%—was down from the 14.7% rate for those who left school in fiscal 2010.

Still, the government's default measure vastly underestimates the problem. The government considers people in default if they have made no payments in 360 days. A broader measure by Federal_Reserve_Governors_sealthe New York Federal Reserve—which accounts for all Americans with student loans—shows that roughly one in four borrowers are at least 90 days behind on a payment.

The government uses the measure to sanction schools with high default rates among former students, and the Education Department said it would strip federal funding for 21 such institutions.

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