Default rates continue downward trend

U.S. Education Department (Photo: Matthew Dembicki)

New federal data show that the student loan default rate for community colleges saw a large decrease in fiscal year 2018 — dropping 3.6 percentage points to 11.5%. The big dip is, in part, due to the federal government freezing student loan repayments during the pandemic, according to two-year college advocates.

The cohort default rate (CDR) at community colleges has dropped slowly but steadily since 2010, when the sector’s rate was 20.9%. Most recently, the rate was 15.1% in 2017, 15.8% in 2016 and 16.6% in 2015. In 2012, the U.S. Education Department (ED) started tracking repayment over three years instead of two.

A concerted effort to lower defaults

The overall downward trend over the past decade is a result of servicers, campus administrators, the federal government and especially borrowers making a concerted efforts to lower student loan defaults, said David Baime, senior vice president of government relations at the American Association of Community Colleges.

“It’s a dramatic improvement that merits emphasis,” he said.

Baime noted that part of the decline in the most recent CDR is due to the pause in student loan repayments provided in light of the pandemic.

“When the pause ends, there will be upward pressure on the rates,” he said.

A look at the numbers

The number of overall student borrowers at public two-year colleges entering repayment also continued to decrease, but again, the federal government halted required payments as of March 2020, which is basically half of fiscal year 2020.

In FY 2018, the number of borrowers entering repayment was 577,591 at public two-year colleges, compared to 644,831 in 2017 — a drop of 67,240 students, according to ED data released Wednesday. Substantially fewer students entered repayment in 2017 than 2016, when 730,146 public two-year college students entered repayment — a difference of 85,315 students.

Regarding public two-year students who defaulted, the number was 66,638 in FY18, compared to 97,795 in 2017 and 116,647 in 2016.

The broader picture

Overall, the CDR for all U.S. public and private colleges and universities dropped to 7.3% from 9.7% in FY17, representing a 2.4 percentage-percent decline. For public institutions, the rate dipped to 7.0% in FY18, from 9.3% in the previous year. Among public four-year schools, the default rate decreased from 6.3% for FY17, to 5.0% in FY18.

About the Author

Matthew Dembicki
is editor of Community College Daily and serves as publications director for the American Association of Community Colleges.