New data on student loan defaults from the Department of Education shows the problem is getting worse. Specifically, the cohort default rate for borrowers whose first loan repayments came due in the 12 month period starting with October 2008, went up to 8.8 percent from 7.0 percent. Kevin Carey says the real truth is even worse than that, noting that this is merely the two-year default rate even when many students default outside that window and also that for many students, the “two-year” window is actually shorter than that since the academic calendar doesn’t line up with the fiscal year.
The really terrifying thing is that this is just a release about Fiscal Year 2009! Nothing good has happened over the course of Fiscal Year 2010 that would turn this situation around. The labor market has continued to be crappy, and yet tuition has continued to rise. Most of this is more the fault of the labor market than the higher education system, but it doesn’t exactly increase my confidence in that sector’s ability to keep charging ever-higher prices for its product.