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U.S News and World Report have recently released new college rankings, which show that Princeton University has been given the honor at the head of the list for yet another year. But Princeton also tops the list of being the university with the highest rate of default on federal government student loans. Does this provide evidence of a new trend or are the figures misleading?
Cohort default rates analyzed during a one year period
The U.S Department of Education’s National Student Loan Data System has analyzed figures from October 2008 to September 2009 and uncovered that Princeton’s cohort default rate stood at 2.2%m four times higher than students at the Massachusetts Institute of Technology, which ranked as number 7 on the top university list. The MIT rate of defaulting on federal student loan repayments is 0.5%.
Closer examination of the figures
Upon closer inspection, however, the figures show a less impressive correlation between Ivy League students and missed loan repayments. During the period that the U.S Department of Education collected cohort default rate figures, only 3 repaying borrowers from Princeton University missed repaying their federal loans. The figure was marginally bigger for students from MIT, with 5 missing loan repayments during the same time frame.
Why does the rate seem worse for Princeton graduates?
The figures for Princeton seem worse because of the smaller number of borrowers overall. Within the period analyzed, Princeton’s 3 defaulting borrowers come from a much smaller pool of borrowers – 132 compared to 876 from MIT. So, there are fewer borrowing federal loans at Princeton than at MIT, giving more weighting to Princeton’s default rate of 3 in 132 versus MIT’s of 5 in 876.
What are the national average figures?
The national average figures for defaults on federal student loans are much higher than for the Ivy League schools. According to the figures from the Department of Education, students across the nation missed their loan repayments at a rate of 13.4%. So, figures of 2.2% for Princeton and 0.5% for MIT are still exceptionally low.
What is the situation at Ivy League institutions?
Students from low to middle income families at high-ranking institutions are oftentimes at less risk of missing loan repayments, due to many of them not needing loan assistance. All Ivy League universities have “no loan” policies whereby grants are offered instead of loans and free aid is made available to students from low to middle income backgrounds that are in need of support ad can demonstrate genuine financial need. For example, at Princeton, all students whom are able to qualify for financial aid will receive it. This means that, in 2011-2012, only 5% of 5,000 Princeton undergraduates were in receipt of federal student loans. Ivy League students may often be better placed to receive “no pay back” help, which may in turn contribute to the lower number of individuals taking federal loans.
So it is fair to say that Ivy League students miss more loan repayments?
For the reasons explained above, it is not entirely accurate to say that students of Ivy League institutions are more likely to default on their federal student loan repayments. However, student loan debt across American is currently at epic proportions, having passed the $1 trillion mark and defaults are constantly rising from all students, irrespective of the ranking of their college.
Graduates – share with our readers your experiences of student debt and managing loan repayments. Did you attend an Ivy League school and receive grant-based financial assistance? We want to know your thoughts – post your comments!
