Probability of Defaulting on Student Loans
7.2%
Conditional probability in US
About 7.2% of student loan borrowers default within 3 years of entering repayment, with for-profit college attendees at highest risk.
The federal student loan default rate (measured as the percentage of borrowers who default within three years of entering repayment) was approximately 7.2% for the FY2019 cohort, according to the Department of Education. This rate has improved from peaks above 14% but remains a significant financial issue.
Default risk varies dramatically by institution type: borrowers from for-profit institutions have default rates roughly 3 times higher than those from public or non-profit schools. Other risk factors include not completing a degree (the strongest predictor of default), borrowing relatively small amounts (often associated with dropouts), attending low-quality institutions, and entering low-paying fields.
Borrowers struggling to make payments should explore income-driven repayment plans (which cap payments at a percentage of discretionary income), deferment or forbearance options, and loan forgiveness programs (Public Service Loan Forgiveness, Teacher Loan Forgiveness, etc.) before defaulting. Default has severe consequences: damaged credit score, wage garnishment, tax refund seizure, and ineligibility for future federal financial aid.
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