Rate of Student-Loan Dollars in Default Declines

A new U.S. Department of Education report shows that the percentage of dollars in default on Federal Family Education Loan Program loans in repayment declined during fiscal 2006. According to the report, the overall annual default rate for all guarantors in the FFELP declined to 1.57 percent, compared with the previous year’s rate of 1.69 percent.

USA Funds^®’ annual rate also declined, to 1.21 percent from the previous year’s rate of 1.41 percent.

The annual default rate compares the dollars of default, less dollars of defaulted loans rehabilitated, against the dollars of loans in repayment in a guarantor’s portfolio. The rate also is known as the trigger default rate, because higher rates trigger lower federal reimbursement to the guarantor, one of several financial incentives that promote strong guarantor default-prevention efforts.