Jefferson City — The default rate for student loans in Missouri has risen to 6.09 percent, up from 4.3 percent last year. Nationally, the rate rose from 5.2 percent to 6.7 percent. The rates track borrowers whose loans originated between Oct. 1, 2006 and Sept. 30, 2007, and went into default before Sept. 30, 2008.

In Missouri, 4,617 borrowers from 160 schools are in default, but 75,925 people are repaying their student loans on time.

"Although the default rate is up significantly, most borrowers are still meeting their student loan obligations," says Missouri Department of Higher Education Assistant Commissioner Leanne Cardwell, who oversees the student loan program. "In 1990, the national default rate was over 20 percent, so by comparison the current rate is low and reflects an increased focus on default prevention efforts."

Cardwell believes the higher default rate reflects the economic downturn that began in 2007. "It stands to reason that the default rates would increase for the borrowers in this cohort.  And, based on the fact that the crisis has continued through 2009, we can expect the same or greater default rates next year," Cardwell says.

In 2001, the Missouri Department of Higher Education began offering grants to postsecondary institutions who want to reduce their student loan default rates. More than $4.2 million has been distributed to 32 institutions of higher education. The schools use the grants to teach students about money management. Default rates for schools participating in the program declined by as much as 8.7 percent since that time.

The U.S. Department of Education provides additional information about student loan default rates in Missouri at http://www.ed.gov/offices/OSFAP/defaultmanagement/cdr.html

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