Affordable Higher Education News

Student Loans Made Through Banks Cause Students to Default

Washington, Sept. 14 - The U.S. Department of Education released the 2007- 2008 default rates on student loans this Monday. The rates have increased from 5.2% in 2006 to 6.7% in 2008, showing that borrowers are increasingly defaulting on their monthly repayment obligations.  

Students who borrowed through the FFEL (Federal Family Education Loan) program defaulted at higher rates than those who borrowed through the DL (Direct Loan) program.   Pending legislation in the US House of Representatives, HR 3221 - the Student Aid and Fiscal Responsibility Act, would eliminate the entitlement banks receive through the FFEL student loan program and direct that money toward students in the form of grant aid.

“The new U.S. Department of Education statistics on rising FFEL default rates reinforce what we have always known, that banks and lenders receive excessive profit made off the backs of student borrowers,”  Rich Williams, the U.S. PIRG Higher Education associate said.  “I call on Congress to cut excessive lender subsidies and to pass HR 3221.”

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For more information on U.S. PIRG’s campaign to pass HR 3221, visit www.uspirg.org/higher-education.