The Education Department has released new data on the percentage of students at more than 5,000 colleges and universities who defaulted on student loans over a three-year period.
The preliminary data appear to be in line with a congressional report out last summer showing that students who took out federal loans to attend for-profit colleges have higher default rates than those who attended public or private non-profit schools.
Colleges where default rates are too high can become ineligible for federal student loans and Pell Grants. Under current law, sanctions are applied based on two-year default rates. The Education Department calculated three-year rates to help schools prepare for a change in federal law that goes into effect in 2014, according to Dan Madzelan, acting assistant secretary for post-secondary education. Under the new law, colleges with three consecutive years of default rates of 30% or more can be sanctioned.
No college will be penalized based on the latest release of three-year rates, which for many schools are higher than the two-year rates. The data was released to help institutions understand where they stand and what the change may mean for them, he adds.
Meanwhile, Terry Hartle, a lobbyist with the American Council on Education, cautions that default rates are not good indicators of institutional quality.
Several studies show that low-income students and those from families who lack higher education are more likely to default on their loans. Student-loan defaulters "can tarnish their credit reports, make it difficult for them to obtain employment, and jeopardize their long-term financial well-being," says an August report by the U.S. Government Accountability Office, the investigative arm of Congress.