Students Beware: The High Loan Default Rates and How to Avoid Them

Oct 25, 2011 3 Comments by

Recently, the Department of Education has revealed a sharp increase in the percentage of students that default on their college loans. And almost half of the defaults from federal student loans occurred at for-profit schools even though those schools serve only about 10% of the population.

So what is the problem here and why are for-profit schools leading the default rate? One possible answer is that the students that attend for-profit schools are likelier to be in a more financially risky situation. Another potential answer is given overall by the relative ease of obtaining a federal student loan.

Regardless of the specific reason, it’s good to be prepared. Let’s look at some ways that you can help avoid becoming another loan-default statistic:

  • Research which schools have high default rates. The reasons may be hard to track down, but it just might be that schools with higher rates aren’t providing the best value or motivation to the students.
  • Delay school. It may sound heretical, but why enter college immediately if you can’t afford it? With the ease of obtaining federal student loans, it may be tempting to leap into school immediately, but depending on what you want to do and how the job market looks, it may be in your interest to earn some money first.
  • Consider carefully the choice of career and cost of the school. If the career in which you’re interested doesn’t pay much and isn’t growing fast, and the cost of the education for it is enormous, watch out!—it may just be difficult to repay those loans.
  • Work throughout your schooling to help reduce debt. Depending on the degree and on your situation, it may be possible for you to work while going to school. Although it can be difficult, doing so may help pay for many of your costs. Also, some employers may have programs that will help pay for education.
  • Seek out scholarships and/or grants. If you work hard and there is a grant program or scholarship program that you may qualify for, seek it out. The extra money will be extremely useful in paying for the cost of your education.
  • Get motivated! Astonishingly, Senator Tom Harkin led an investigation that discovered that last year almost 25% of students from a for-profit college did not manage to obtain a degree. In such a situation, the costs of those years of school do not disappear! Thus it is important to choose a degree for which you are well-suited. Make sure that you’ve found a college degree in which you know you can do well and in which you will be motivated.

Always remember to review your options and situation very carefully before taking any advice and making any decision. Seek out help from parents, friends, or advisers to be certain that you’ll do everything you can to make good decisions and avoid defaulting on your student loans.

Financial Aid, Student Loans

About the author

The author didnt add any Information to his profile yet

3 Responses to “Students Beware: The High Loan Default Rates and How to Avoid Them”

  1. Jaime says:

    Thanks for this information. I needed to find some info about financial aid.

  2. jon says:

    Getting financial aid seems so complicated and I need to be sure about what I am getting into. What is the best way to safeguard myself.

  3. Education Connection says:

    Hi Jon. The best advice is simply to educate yourself on everything you can about financial aid, whether you do research on your own or speak to a financial aid advisor just be sure you get all your questions answered before taking the leap.

Leave a Reply