In addition to posing problems for borrowers, the article notes that loan defaults have consequences for colleges, as the U.S. Department of Education can impose sanctions on schools with default rates above 30 percent for three years in a row, or 40 percent for a single year. This year, 10 colleges — mostly cosmetology and barber schools — hit those thresholds, so their students won’t be able to take out federal loans or receive federal grants unless they win an appeal to the department.
Also noted is the fact that while the default rate at public colleges held steady at 11.3 percent, the rates at private non-profit colleges and for-profit colleges edged up, from 7 to 7.4 percent and 15 to 15.5 percent, respectively. And, a more comprehensive look at the government’s portfolio shows millions of people hadn’t made a payment on approximately $144 billion in federal student loans for at least nine months as of June — a 12 percent increase in defaults from the previous year.
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