Student Loan Default Rate
The percentage of borrowers who fail to make payments for 270 or more days on their federal student loans, a key indicator of institutional quality.
Detailed Explanation
The cohort default rate measures the percentage of a school's federal student loan borrowers who enter default within a specified window after leaving school. The Department of Education publishes three-year cohort default rates for every institution participating in federal financial aid programs. A borrower is considered in default after 270 days of missed payments on a federal loan. Schools with default rates above 30% for three consecutive years or above 40% in any single year risk losing eligibility to participate in federal student aid programs. Default rates vary dramatically by institution type: for-profit colleges historically have the highest rates (often 15-25%), followed by public two-year colleges (10-18%), while selective four-year institutions typically have rates below 5%. Default carries severe consequences for borrowers, including wage garnishment, tax refund seizure, damaged credit scores, and ineligibility for future federal aid. On CollegeROI, we factor institutional default rates into our assessment of school quality and student outcomes.
Related Terms
Student Loan
Money borrowed to pay for college tuition, room, board, and related expenses that must be repaid with interest after leaving school.
Federal Student Loan
A student loan funded by the U.S. Department of Education with fixed interest rates, flexible repayment options, and potential forgiveness programs.
For-Profit College
A postsecondary institution operated by a private, profit-seeking company, as opposed to public or nonprofit institutions. Often associated with higher debt and lower outcomes.
Gainful Employment
A federal regulation requiring career-training programs to demonstrate that graduates earn enough to repay their student loans, with noncompliant programs losing federal aid eligibility.
Frequently Asked Questions
What is student loan default rate?
The percentage of borrowers who fail to make payments for 270 or more days on their federal student loans, a key indicator of institutional quality.
Why does student loan default rate matter for college ROI?
The cohort default rate measures the percentage of a school's federal student loan borrowers who enter default within a specified window after leaving school. The Department of Education publishes three-year cohort default rates for every institution participating in federal financial aid programs. A borrower is considered in default after 270 days of missed payments on a federal loan.