Students at for-profit schools are swimming in sea of debt.
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While the default rate by student borrowers continues to inch upward nationally, Utah's contribution to the growing default crisis continues to decline, according to data released Monday by the U.S. Department of Education.
Since 2005, Utah's student loan default rate steadily slipped from 4.3 to 1.9 percent, less than one-fourth the national average, the Utah System of Higher Education reported. For students who began repaying loans in 2008, Utah has the lowest default rate in the nation behind Montana, said David Feitz, executive director of the Utah Higher Education Assistance Authority (UHEAA).
Officials credited low student-debt loads and the state's special programs to service student borrowers.
When a Utah borrower becomes delinquent in loan payments, a special UHEAA prevention team member calls to help formulate a plan that will enable the borrower to get and stay current on the loan.
"Credit goes to our students who are responsible for paying their loans back," Feitz said.
Monday's numbers were encouraging for Utah, but federal authorities found little soothing about the national default rate of 7 percent.
In a statement, U.S. Secretary of Education Arne Duncan blamed for-profit schools for some of the increase.
In award year 2008-09, students at for-profit schools represented 26 percent of the borrower population and 43 percent of all defaulters, according to the Education Department data. The median federal student loan debt carried by students earning associate degrees at for-profit institutions was $14,000.
According to the data, this sector had the highest default rate, rising to 11.6 percent. The annual rate of student-loan defaults climbed from 6.7 percent in the same period a year earlier.
The default rate is a snapshot in time, representing borrowers whose first loan repayments came due between Oct. 1, 2007 and Sept. 30, 2008, and who defaulted before September 30, 2009. The measurement is used to determine which schools will remain eligible to participate in U.S. student aid programs.
Default rates among for-profit college students were almost twice the 6 percent rate found at public nonprofit colleges and almost three times the 4 percent rate at private nonprofits, according to the statement.
"While for-profit schools have profited and prospered thanks to federal dollars, some of their students have not," Duncan said in the statement. "Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use."
The Obama administration is toughening its lending standards with greater scrutiny of defaults, and it's proposing to monitor loan repayment rates and incomes among students who have attended for-profit colleges.
The default measures currently in use "fall far short of capturing the full range of defaults or distressed borrowers," said Lauren Asher, president of the Institute for College Access & Success, an advocacy group in Oakland, Calif. "Right now, there's no information that tells us whether career education programs are delivering quality training for jobs."
Bloomberg News contributed to this story.
Student loan default rates
Public schools nationwide • Increased from 5.9 to 6 percent in 2008
Private schools nationwide • Increased from 3.7 to 4 percent
For-profit schools nationwide • Increased from 11 to 11.6 percent
Utah overall • Decreased from 1.9 from 2.1 percent
Nation overall • Increased from 6.7 to 7 percent
Source • U.S. Department of Education