Federal student aid remains one of the best mechanisms for financing higher education. However, persisting economic anomalies are taking a tall on recent college graduates.
According to Bloomberg, “student-loan default rates for people who recently left school rose to 6.9 percent from 5.2 percent a year earlier as a deteriorating economy weighed on borrowers,” the U.S. Department of Education said.
The rate is based on borrowers who were to begin making repayments between October 2006 and October 2007, and who fell at least nine months behind by late September 2008.
Almost 232,000 of those borrowers entered default, a 13 percent increase from the previous year and a jump of 43 percent from two years earlier, the department said.
The amount that students are borrowing for their education has been increasing at a dramatic pace in recent years. There is currently half a trillion dollars in federal student loan debt outstanding. The good news however is that the most recent rate is still well below the peak default rates of the late 1980s, when the rate rose over 22%.