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Setting the Record Straight on Our Student Default Rate Story

In the Dec. 16, 2009, post Real Student Default Rates Much Higher Than Previously Known, we reported that the Department of Education was projecting that 47 percent of the federal money lent to students at for-profit education institutions in 2007 would never be repaid. We also said that the department had estimated that 40 percent of the money lent to students at for-profit institutions between 2003 and 2006 would be written off.

Those statements – a main thrust of the article – are not accurate. The Department of Education projection at issue said that over 40 percent of the money lent to students at for-profit institutions would be in default at some point over the life of the loans. The estimate did not say how much of this money would ultimately be lost to the Treasury and a borrower in default can, and often does, end up repaying what is owed.

Also, the federal government has powerful means of recovering money from students who stop paying, including the garnishing of wages. Students’ debts to the government are not wiped out by personal bankruptcy.

We have asked the Department of Education to provide us with the information on how much money is actually recovered from students who default and to break it down by type of institution: for-profits, private nonprofits and public institutions, respectively. We’ll let you know as soon as we get that data.

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