Student Loan Defaults Hit $146 Billion, Highest Default Rate Level Since 1995

Almost exactly one year ago we wrote "The Next Subprime Crisis Is Here: Over $120 Billion In Federal Student Loans In Default" in which we took the latest (2009 three year cohort) loan default data on Federal Student Loans released by the Department of Education and applied it to the total amount of student loans outstanding, which back then was $914 billion. Yesterday, ED.gov provided its annual update - this time to the 2010 three year and 2011 two year cohorts - and to nobody's major surprise, learned that things just got even worse. 

To wit: "The national two-year cohort default rate rose from 9.1 percent for FY 2010 to 10 percent for FY 2011. The three-year cohort default rate rose from 13.4 percent for FY 2009 to 14.7 percent for FY 2010." Putting this in context, according to Bloombergdefaults have risen to the highest level since 1995. The irony that this is happening in the aftermath of Bernanke's disastrous ZIRP policy is not lost on anyone.

Quantifying this percentage, recall the NY Fed reported in its second quarter household credit update that the amount of total outstanding student loans has now risen to $994 billion, or $80 billion more in just one year. Read more >>