Many students are unable to pay back their school loans, especially those attending for-profit institutions, according to the Education Department.
The department ‘s most recent default data , which looks at loans that entered repayment periods between Oct. 1, 2007 and Sept. 30, 2008 and defaulted before Sept. 30, 2009, shows that 7% of federal student loan borrowers defaulted within two years of beginning repayment, up from 6.7% the previous year. Put another way, just over 238,000 of the 3.4 million students couldn’t pay back the money they owed.
“This data confirms what we already know: that many students are struggling to pay back their student loans during very difficult economic times," U.S. Secretary of Education Arne Duncan said in a press release.
Duncan went on to point out, however, that the most defaults come from students attending universities or educational institutions run by private, profit-seeking organizations. These institutions range in size, from small trade schools to larger chains, such as the well-known University of Phoenix.
The Education Department said that enrollment in these types of institutions increased during the last two years. Growth aside, in the last 2008-09 year, students at for-profit schools represented 26% of the borrower population and 43% of all defaulters. The median federal student loan debt carried by students earning associate degrees at for-profit institutions, according to the Education Department, was $14,000.
Comparatively speaking, the default rate at public nonprofit colleges was 6%, up only one-tenth of a percentage point from last year’s data. Rates at private nonprofits increased from 3.7% to 4%, year over year.
“While for-profit schools have profited and prospered thanks to federal dollars, some of their students have not,” Duncan said. “Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use.”