WASHINGTON – Fewer college students defaulted on federal loans in 1994 than in any year since 1986, when the rate was first recorded, according to a report released Thursday by the U.S. Department of Education.
The national default rate on the student loans fell from 15 percent in fiscal year 1992 to 10.7 percent in fiscal year 1994, the report said. At Maryland colleges, the default rate fell from 14.7 percent in fiscal year 1992 to 11.3 percent in fiscal year 1994, according to additional data from the Education Department.
“We have used every tool available to slash the default rate and save taxpayers hundreds of millions of dollars,” Education Secretary Richard Riley said in a written statement.
He said the Clinton administration’s goal is to continue to improve “accountability and stewardship” of all federal student aid programs, giving all qualified students the resources to attend higher education.
The loan default rate fell because the Education Department tightened requirements for participating schools and exercised new collection powers, the report said.
Between 1992 and 1994, the Education Department removed 672 colleges from all federal financial aid programs because of high default rates, leaving 7,935 participating in loan programs, the report said.
Schools with a one-year default rate of 40 percent or higher may face restrictions on student loan eligibility. The crackdown followed passage of congressional legislation in 1990 and 1992 that expanded the collection powers of the Education Department. It used powers, including wage garnishment and litigation, to collect $500 million from 1992 to 1994. -30-