Defaults In The Federal Guaranteed Student Loan Programs

This report presents data on default rates within two major federal student loan programs, the Federal Direct Loan Program (FDLP) and the Federal Family Education Loan Program (FFELP). Data from the National Student Loan Data System for 1997 and 1998 indicate that, overall, direct and guaranteed student loan programs had similar default rates--6.6 percent for FDLP and 6.7 percent for FFELP. They also had similar default rates when the comparisons emphasized type of school. Within FDLP, default rates differed substantially between nonconsolidated and consolidation loans for two of four repayment options (standard and income contingent repayment). Although reasons for these differences were unclear, student loan experts said the results often reflected differences in the overall credit-worthiness of borrowers who used the various options. The Department of Education used several means to ensure proper FDLP loan servicing and collection (monitoring requirements, independent monitoring, and external assessments). Appended are data on study scope and methodology; cohort default rates for FDLP an FFELP borrowers by type of school, cohort years 1997 and 1998; data on FDLP nonconsolidated and consolidation loans in repayment; data on FDLP consolidation loans in repayment, by borrower risk; and comments from the U.S. Department of Education. (SM)