Student loan defaults surge to highest level in nearly 2 decades

Tim Goral's picture
Wednesday, October 2, 2013

Recent college students are defaulting on federal loans at the highest rate in nearly two decades, reflecting "crisis" levels of student debt and a lackluster economy that leaves graduates with bleak employment prospects.

One in 10 recent borrowers defaulted on their federal student loans within the first two years, the highest default rate since 1995, according to annual figures made public Monday by the Department of Education.

A separate gauge, measuring defaults occurring within the first three years of required payments, showed that more than one in seven borrowers with federal student loans went into default, an event that can trigger invasive debt-collection methods that include fees, wage garnishments, and withheld IRS tax refunds.

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