Student Loan Default Rates on the Rise

Updated statistics released by the U.S. Department of Education show that student loan defaults are rising. According to the latest figures, the default rate for government loans that entered repayment in 2008 is 13.8 percent, up 2 percent from the default rate for federal student loans that entered repayment in 2007.

The current official national student loan default percentage, which stands at 7.0 percent, measures the percentage of borrowers who default on their federal education loans within the first two years of repayment. But when the calculation is expanded to take into account defaults within the first three years of repayment, the national student loan default percentage jumps to13.8 percent.

The New College Grad: Unemployed, in Debt, and Defaulting

Under new rules implemented by the Higher Education Opportunity Act of 2008, the three-year calculation will soon be used as the standard measure of student loan default percentages. Beginning in 2014, colleges and universities whose default percentages rise above 30 percent will lose access to federal financial aid - government-funded grants and education loans - for incoming and existing students.

Current federal regulations cut off a school's eligibility for federal student aid when the school's default percentage exceeds 25 percent, but that guideline uses the more forgiving two-year default rate. Officials at the Education Department attribute the rise in student loan defaults to the soft job market and the ballooning number of recent graduates who are finding themselves unemployed and with a pressing need for debt relief.

Education Department officials also point to the growing amount of college loan debt being accumulated by students, particularly at pricier for-profit colleges and private nonprofit four-year universities. Among undergraduates who leave college with debt from school loans, the average student loan debt load is $23,186, according to FinAid.org.

Using the three-year default rate calculation, the default rate for students of private nonprofit colleges and universities is 7.6 percent, compared to a 4-percent two-year default rate. Among public university students, the three-year default rate is 10.8 percent, versus a two-year default rate of 6 percent.

The biggest jump from two-year to three-year student loan defaults is seen among students from private for-profit colleges. Using the three-year measure, the default rate among these borrowers is 25 percent, more than double the two-year default rate of 11.6 percent.

New Rules Threaten Schools' Access to Financial Aid

According to an analysis conducted by The Wall Street Journal, nearly 9 percent of higher education institutions would lose their ability to offer federal student aid if the new default rules on college loans were in full effect today. Under the current rules, only 1.6 percent of schools lost their eligibility for federal grants and college loans due to excessive student defaults.

A 2003 report from the Inspector General for the Department of Education charged that some for-profit colleges had become so concerned about the rise in student loan defaults among their former students that the schools were masking their true institutional default rates. Two high-profile cases in 2008 and 2009 charged two for-profit school with paying off delinquent student loans in order to avoid having to report the defaults, a practice that violates federal financial aid regulations.

In response to these and other barrages of accusations being fired at for-profit colleges, the Department of Education is considering other regulations that would prevent the for-profits from misrepresenting the financial health of their graduates by manipulating student loan default percentages.

In one proposed measure, termed the "gainful employment rule," the Department of Education will not only look at student loan repayment rates but also graduates' debt load from school loans as a percentage of the income these students earn after they leave school. By tying a for-profit school's eligibility for federal student aid to gainful employment following college, the Education Department is hoping to stem the spiraling levels of student loan debt at for-profit colleges, which historically have produced the highest default rates.

Student loan default rates have garnered new attention from the Education Department not only because the default rate is rising but also because the department is under Congressional pressure to produce a more cost-efficient student lending process with fewer losses from defaulted loans. The Department of Education is expected to issue the finalized gainful employment rule later this spring.

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Student Loan Consolidation From Chase: Your Best Choice

Chase is one of the leading banking institutions that caters to financial aid for students facing difficulties brought about by the various loans they have incurred while pursuing a higher education. There are many other institutions out there that give out the same offer yet, a lot of people go for Chase Student Loan Consolidation. Chase, along with Citigroup, Bank of America and Wells Fargo, make up the four biggest banks in the United States. You can definitely be assured that Chase is a banking institution that you can depend on.

JP Morgan Chase has a reported US $2 Trillion asset and considered to have the second highest market capitalization. Their financial services are offered worldwide with their headquarters located in New York City. Their financial products would include consumer and corporate banking, financing and insurance, investment banking, mortgage loans and credit card loans. If you are facing problems with the various loans incurred while in college, you would want to apply for a student loan consolidation offered by Chase. Here are the benefits in choosing to consolidate your different student loans through this reputable lender:

a. The loan product merges all your eligible student loans together into one single loan. Because of this, you only have to focus on one monthly payment.

b. You can extend your repayment period to as long as 30 years. Longer repayment period would give you a lower monthly payment. This will allow you the breathing space you need as you continue to apply for a better paying job. Lower monthly payment can also give you extra cash in your pocket.

c. Interest rate in consolidating through Chase is competitive and slightly lower compared to the combination of interest rate of your individual loans. The interest rate offered by Chase is also lower compared to other private lending institution.

d. You can consolidate 3 or more private loans from other lenders and apply any time after graduation.

e. There is no penalty if you choose to pay off your account early than the original repayment period. This is, in fact, being highly encouraged for the student to save money in the long run.

f. Your application for a student Loan Consolidation can hasten if you have a parent or other relatives or friends to apply with you.

g. Chase Bank has competent and efficient staffs that will help you in applying for your student loan consolidation.

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A Beginner's Guide to Unsecured Student Loans

If you're a parent who wants to send your child to college, one of the possibilities you are thinking about to finance that college education might be by way of unsecured student loans. What are these?

An unsecured loan is any loan that doesn't call for collateral from the borrower. The opposite is the secured loan where the borrower provides collateral to the lender as a form of security against the loan in case of default in payments by the borrower. When looked at this way, the unsecured loan is riskier from the perspective of the lender than the secured loan. For the borrower, not having to provide a form of security for the loan makes it a additional attractive option for financial undertakings.

Unsecured student loans are loans those unsecured loans taken out by students or by parents in behalf of their child, normally to finance a college or graduate education. This kind of loan is well-known simply because students do not usually have any collateral for instance a house or a vehicle to supply to lenders as security. For you the parent-cosigner, the tough component about acquiring unsecured student loans is that lenders will prefer that you've an excellent credit score and have the ability to demonstrate that you've the ability to pay back the loan by having a stable job or source of income. For students who prefer to apply for unsecured student loans themselves they have to keep this fact in mind when they approach possible lenders.

If you're seeking a great lender for that unsecured student loan, regardless of whether you're a student or a parent doing so for your child, make certain you look at the annual interest rate provided by the lender. This tells you the amount of interest you will be paying over the repayment period. It will also give you an concept of how much the total value of the loan might be over time and this can help you compare unsecured student loan packages provided by the unique lenders. Naturally, the lower the annual interest or percentage rate, the better it needs to be. Nonetheless, you should also take note of the repayment period, the monthly payments you will make as well as the total loan amount that can be approved by the lender when you make your search.

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