When the U.S. Department of Education released new data this week showing that the three-year default rate on federal student loans had increased from 13.4 percent to 14.7 percent, Zakiya Smith, a former senior education policy adviser for the Obama White House, said she became “alarmed.”
The reason is because the latest default rates involve a cohort of students who began repaying their loans during a time when the Obama administration was trying to “get the word out” about various repayment options meant to help students avoid default, Smith said.
“This rate increase is based on a time period when Income-Based Repayment and Pay As You Earn options were available to students,” said Smith, who now serves as strategy director for student financial support at the Lumina Foundation for Education, an Indianapolis-based organization that espouses increasing the number of college graduates with degrees of value in the labor market.
“It goes back to if we have those options available, you would think — even if the economy was pretty bad — maybe the default rate wouldn’t be going up at such a high rate,” Smith said.
She said the higher default rates suggest that “people don’t know about” IBR.
“They wouldn’t have defaulted if they were in the program,” Smith said.
