Is the College Debt Bubble Getting Worse?


College is big business, as millions of students decide to pursue a post-secondary education every year. There are many benefits to investing in higher education, but the skyrocketing cost of a degree and a weak economy have many people defaulting on student loans.

A new report shows that around one in seven borrowers defaulted on their federal student loans. According to the U.S. Department of Education, the national two-year cohort default rate increased from 9.1 percent to 10 percent in fiscal year 2011 compared to the previous year. Making matters worse, the three-year default rate jumped from 13.4 percent to 14.7 percent. Those are the highest default rates in about 15 years, and they don’t even include people who are delaying payments through forbearance or deferment.

“The growing number of students who have defaulted on their federal student loans is troubling,” U.S. Secretary of Education Arne Duncan said in a press release. “The Department will continue to work with institutions and borrowers to ensure that student debt is affordable. We remain committed to building a shared partnership with states, local governments, institutions, and students — as well as the business, labor, and philanthropic leaders — to improve college affordability for millions of students and families.”