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You Should Know…the Rest of the Story!

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CECU continues to provide you an inside analysis of important – and often hostile – stories about our sector. Today’s publication continues that commitment.

Yesterday, the U.S. Department of Education released the most recent official federal student loan Cohort Default Rates for FY 2016. In summary, the rates by school type are:

  • Public: 9.6%
  • Private Nonprofit: 6.6%
  • Proprietary: 15.2%

In a recent Forbes article, a contributor wrote, “The default rates at those schools were so high that, even though for-profits accounted for approximately 22% of all borrowers, they accounted for approximately 33% of all defaults.”

First, you should know that no sector has done more since the publication of the three-year cohort default rates to improve their outcomes than our sector. The proprietary sector rate fell from 22.7% to the current rate of 15.2%, a 33% decrease from the 2009 rate.

Second, you should know that 1 out of every 2 borrowers who default is from the public sector.

FY2016 default rates Defaulters Borrowers Share of borrowers Share of defaulters
Public 236,948 2,467,803 55% 52%
Private Nonprofit 71,515 1,069,593 24% 16%
Proprietary 149,892 985,335 22% 33%
Total 458,355 4,522,731

Finally, we look carefully at our sector’s default rate. If one removes just a few of the largest schools that offer predominately online programs, the sector’s overall default rate further declines three points to less than 12%! In this case, a handful of schools have a considerable impact on the sector’s overall default rate.

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