U.S. Student Loan Default Rate Drops Dramatically

The student loan default rate has dropped sharply and government collection efforts have cut net default costs by more than two-thirds since 1992, Education Department Secretary Richard W. Riley said Monday.

The rate of borrowers defaulting on student loans dropped to 11.6% in fiscal 1993, the latest year for which figures are available.

That was the lowest rate since official default-rate reporting began in 1988. It has declined steadily since 1990, when it peaked at 22.4%.

“These numbers reflect real and substantial progress,” Riley said. “They are the product of several aggressive management decisions that were intended to get the default problem under control.”

The numbers were disclosed in an attempt to counter congressional criticism by showing the department was improving its management of student loan funds.

Republicans have sought to limit the direct student loan program, under which the department bypasses bankers and lends directly to about 2.5 million students at 1,350 schools.

The program is now open-ended; the GOP would limit it to 10% of all student loan volume.

Education Department officials acknowledged that an improving economy contributed to the improved rate and that Bush administration programs deserved some credit. But they said they accelerated those programs.