Department of Education published their Orange Book for the Perkins Loan program showing that 10.04% of borrowers entering repayment in 2007-08 defaulted by September of 2009. The comparable number for 2006-07 cohort was 8.32%. The average Perkins loan in default was just over $1,950 for the 2007-08, which is up from almost $1,800 from the earlier cohort.
- The Perkins CDR is higher than the draft 2008 cohort default figures for the federal student loan program, which were recently announced at 7.2%. It also showed a more dramatic increase in going from 8.32% to 10.04% then the federal student loan CDR wich grew from 6.7% to 7.2%. Given that these loans are going only to the neediest students, it probably shouldn't be a surprise that the default rates have risen faster than for the federal loan programs.
- Note: the 2006-07 Orange Book appears to have an error in it as Rio Hondo Community College's entry has 1.27 million borrowers entering repayment and 53,770 defaulters which is clearly incorrect. I arrived at the 8.32% CDR figure for by stripping these numbers out.
As a quick refresher, here is a description of the Perkins program pulled from the Federal Perkins Loan website:
The Federal Perkins Loan Program provides low-interest loans to help needy students finance the costs of postsecondary education. Students can receive Perkins loans at any one of approximately 1,800 participating postsecondary institutions. Institutional financial aid administrators at participating institutions have substantial flexibility in determining the amount of Perkins loans to award to students who are enrolled or accepted for enrollment. Borrowers who undertake certain public, military, or teaching service employment are eligible to have all or part of their loans canceled. In general, schools are reimbursed for 100 percent of the principal amount of the loan canceled, and the reimbursement must be reinvested in the school's revolving loan fund. These institutional reimbursements for loan cancellations are an entitlement.
Loan volume in the program comes from: (1) newly appropriated FCC contributions and loan cancellation payments; (2) an institutional matching contribution equaling at least one-third of the FCC contribution; and (3) school-level collections on prior-year student loans.