Education Sector in the News

The Chronicle of Higher Education, Diverse Issues in Higher Education, and Inside Higher Ed write about Education Sector's new report Lowering Student Default Rates: What One Consortium of Historically Black Institutions Did to Succeed.

From "6 Historically Black Colleges Serve as Models for Lowering Student-Loan Default Rates" in The Chronicle of Higher Education, February 23, 2010:

"Certain types of students, including those who are first-generation or low-income, are more likely than others to default on their education loans. But even colleges that serve a large share of at-risk students can help prevent too many of them from defaulting, according to a report released Tuesday by Education Sector, an independent think tank.

The report, "Lowering Student Loan Default Rates: What One Consortium of Historically Black Institutions Did to Succeed," examines the best practices of a group of colleges that reduced their loan-default rates while continuing to serve large numbers of disadvantaged students. It also analyzes the characteristics of different types of colleges and their student bodies that contribute to default rates.

The federal government assumes that colleges have a role in whether their former students default on their loans, which usually means failing to make a payment for 270 days. A college can lose its eligibility to participate in federal financial-aid programs if a measure called the "cohort default rate" is too high. A cohort consists of borrowers who were required to start paying back their federal loans in the same year, and the default rates for colleges are based on what percentage of them default by the end of a two-year period.

The rule has been a hot topic lately because the government will start calculating the rate using a three-year time period instead of two, which will put more colleges at risk of losing their aid eligibility. Colleges will be held to the new standard beginning in 2014. And, as more students borrow more money to pay for college, and job prospects for graduates remain weak, students' ability to pay back their loans is a growing concern.

Colleges now risk losing their aid eligibility if their cohort default rate is 25 percent or greater for three years in a row, or 40 percent or greater in any one year. Under the new tracking period, colleges will be ineligible if the rate is 30 percent or more for three straight years."

Read more from this article in The Chronicle of Higher Education.

From "HBCU Case Study Documents How Schools Can Help Students Pay Back Loans" in Diverse Issues in Higher Education, February 23, 2010:

"They are called recession graduates. They have moved back home; they are just beginning to understand what their credit score means; and after four-plus years of attending their choice school they find themselves jobless or under-employed.

Without the money to pay back thousands of dollars in school loans, increased defaults will debilitate a growing number of graduates—many of whom came from low-income households and attended schools as first-generation college students—and their institutions will suffer stiff penalties due to having increased rates of delinquent borrowers.

A new report from the Washington-based Education Sector organization released Tuesday called "Lowering Student Loan Default Rates: What One Consortium of Historically Black Institutions Did to Succeed," argues that institutions can work proactively to reduce default rates among former students using "default-aversion" strategies. Education Sector is an independent, nonpartisan think tank that develops progressive education policy ideas and proposals. ..."

Read more from this article in Diverse Issues in Higher Education. 

From "Effecting Change on Default Rates" in Inside Higher Ed, February 23, 2010:

"Colleges, unlike leopards, can change their spots (or in this case their default rates), a study released today argues.

The report by Education Sector, "Lowering Student Loan Default Rates," is largely a historical look at how a consortium of historically black colleges and universities, faced with the prospect of federal penalties a decade ago, altered their policies and programs in ways that helped to lower their so-called cohort default rates and keep the colleges out of trouble.

The report's authors share the details of that story now not because it is interesting or compelling -- though it is -- but because they believe it sheds light on a timely problem facing other colleges as the federal government is again poised to change its approach to calculating student loan default rates.

Beginning in 2014, colleges will be judged based on the proportion of federal loan borrowers who begin loan repayments in a given fiscal year and who default on their loans within three years, up from the current two. Institutions with cohort default rates above a certain threshold risk losing their access to federal loan or grant funds, and the change in the formula is expected to put significantly more institutions at risk.

Among those most likely to be affected are for-profit colleges, which on average have the highest default rates now. Leaders in the career college sector have long objected that default rates are a seriously flawed indicator of the quality of institutions -- a point argued forcefully in 2008 research by Indiana University scholars and commissioned by the Career College Association; the research generally argued that individual student traits (income, etc.) mattered more than institutional factors, such as institutional type (public vs. private, for-profit vs. nonprofit, etc.), levels of students' borrowing, etc. ..."

Read more from this article in Inside Higher Ed.