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Borrowers Having Harder Time Repaying Student Loans

Borrowers are having a harder time repaying their student loans.

The percentage of borrowers who defaulted on their federal student loans within two years of their first payment jumped to 9.1% in fiscal year 2011, up from 8.8% the previous year, according to U.S. Department of Education data released Friday.

 That represents 375,000 of the more than 4.1 million borrowers who were required to start making payments on their student loans in the 12 months prior to October 2010 and defaulted before September 2011.

Borrower are considered in default when they miss payments for 270 consecutive days.

The percentage of borrowers who defaulted within three years of their first payments was 13.4%, down slightly from 13.8%. The report marks the first year the Department of Education published the three-year default rate, and it will make public only three-year rates starting in 2014.

In terms of schools, those with two-year default rates above 25% for three consecutive years can lose eligibility for federal aid, including Pell grants. Two schools fell into that category: Centro de Estudios Mutidisciplinarios in San Juan, Puerto Rico, and Tidewater Tech in Norfolk, Virginia.

In addition, the agency said 218 colleges and universities had three-year default rates of 30% or more.

The department said it would not yet sanction any schools based on the three-year default rates. But it will require those schools to submit default management plans and create default prevention task forces.

Default rates have been increasing since 2007, an upward trend that’s directly correlated to the economy, said Justin Draeger, president of the National Association of Student Financial Aid Administrators.

“Clearly those with a college education are better able to get jobs…

Read more: CNN

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