Default rate for federal student loans declines, some colleges could still face sanctions for high default rates

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The default rate on federal loans declined this fiscal year, the U.S. Department of Education announced Wednesday.

Among students who left school in fiscal year 2011, 13.7 percent of students had defaulted on their federal loans by this year, according to the new data. This is slightly lower than the 14.7 percent rate for the students that left school in 2010.

The government now measures default rates over three-year period and includes people that have not paid in 360 days as in default.

The U.S. Congress in 2008 expanded the window for tracking default rates up to three years, from two years.  This was expected to increase the rates and to show a clearer picture of the entire problem.

Sanctions for high default rates at particular colleges will kick in with the release of this data. Colleges will lose eligibility for all federal aid, including the Pell Grant program, if their default rates topped 30 percent for three consecutive years or 40 percent for a single year, Inside Higher Ed reported.

Though there was a slight decline in default rates from 2013’s historic high, this rate is still higher than usual. For most of the 2000s, the default rate was well under 10 percent.