With the withering economy making it tough for students to find jobs after graduation, an increasing number of borrowers are defaulting on their student loans.
The overall default rate on federal student loans grew to 7 percent in fiscal 2008 from 6.7 percent a year earlier, says the Department of Education. It's the highest default rate since 8.8 percent in 1997.
Of the 3.4 million students due to make their first loan repayment between Oct. 1, 2007 and Sept. 30, 2008, more than 238,000 defaulted before Sept. 30, 2009.
Graduates of public colleges posted a 6 percent default rate, up from 5.9 percent a year earlier. Private school students had a 4 percent default rate, up from 3.7 percent. For-profit school borrowers defaulted at a rate of 11.6 percent, up from 11 percent a year earlier.
"This data confirms what we already know: that many students are struggling to pay back their student loans during very difficult economic times," said U.S. Education Secretary Arne Duncan in a statement.
For-profit schools, which have come under scrutiny for facilitating high-balance loans that students will likely find difficult to repay, have some of the highest default rates. Students at those institutions represent 26 percent of the borrower population, but account for 43 percent of all defaulters.
"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. This is a disservice to students and taxpayers, and undermines the valuable work being done by the for-profit education industry as a whole."
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