Carlo Salerno en College, Students, Loans and Mortgages Private Consultant • Self 8/10/2016 · 4 min de lectura · 1,3K

Student loan defaults are down. Here's why that's a bad thing.


Last week the U.S. Department of Education released its most recent Cohort Default Rate (CDR) statistics for U.S. colleges and universities. As federal stats go, they’re practically catnip to pundits and the press because students at institutions where rates are too high risk losing access to federal grant and student loan aid. Given how much people borrow to pay for college today, revoking an institution’s eligibility ends being nothing short of a death sentence as we saw recently with ITT.

This year’s numbers (the FY2013 cohort) show the national 3-year CDR now stands at 11.3 percent, which is down from 11.8 percent last year.

For some, any drop is a good drop; still it’s hard to get excited about a half-percentage point decline when you think about the sheer amount of effort and dollars the administration’s put into getting us here.

In the past eight years alone we’ve seen no less than three programs introduced that cap borrowers’ payments based on their monthly incomes. The cost to taxpayers? Upwards of $20-billion.

For that kind of money there shouldn’t be any defaults (no really, they could’ve spent those dollars just paying off the loans) yet that’s only the tip of the iceberg when it comes to the amount of help that struggling borrowers get.

To even get to default a borrower has to have not made a monthly payment for almost an entire year and ignored several hundred offers of help in the form of calls, text messages and letters from his servicer. Yes, several hundred. Not only that, he has to have passed on some 56 different repayment or economic hardship options put in place specifically to prevent this very thing from happening.

We’re talking about an obligation from the federal government folks, not a loose promise to pay your grandmother back. Nobody forgets they have such a debt and even if they did no lender would ever l