Sara Routhier, Managing Editor of Features and Outreach, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming worl...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Oct 2, 2012

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For the sixth straight year in a row college loan defaults have risen, according to a Department of Education report.

Numbers released by the Department of Education reveal that of the 4.1 million borrowers that began making payments in late 2009 and early 2010, 9.1 percent defaulted within just two years. This is a 0.3 percent increase in defaults from the 8.8 percent seen one year ago.

“Student loan defaults still continue to plague too many borrowers. The numbers are distressing, and they needn’t be so high,” said Debbie Cochrane, research director for The Institute for College Access & Success, in a USA Today news report.

Experts attribute the default increase to soaring college loan debt, the weak economy, and a lack of borrower education. Unlike previous years where the increase was largely attributed to for-profit colleges, this year’s increase can be blamed on borrowers who attended non-profit colleges. Public college loan default rates stand at 8.3 percent compared to 5.9 percent just four years ago, according to the report.

Surprisingly, for the first time in four years, the two-year default rate for for-profit colleges fell from 15 percent last year to 12.9 percent this year.

For-profit schools have long been criticized for luring in unqualified students while failing to disclose employment and college loan debt rates. In recent years, for-profit schools have implemented new policies that control student recruitment and advertising while changing some financial aid aspects. This may have contributed to the for-profit default rate dropping.

“This is a sign those rules are somewhat successful. All the criticism has lead to these colleges trying to clean up their house,” said Mark Kantrowitz, publisher of FinAid.org and fastweb.com, in a USA Today interview.

Kantrowitz believes college loan default rates have reached their peak and he expects them to drop next year based upon reforms, lower interest rates, and a better economy.

At least one politician joined Kantrowitz in his criticism of the current situation.

“This default data raises serious questions about the quality and value of the education students receive from these schools,” said Sen. Tom Harkin, D-Iowa who led several committee investigations into for-profit educations, in a USA Today interview.