Today,the U.S. Department of Education released its three year cohort default rates. The data showed the overall decline in default rates was driven by private sector institutions. Additionally, when compared to community colleges, private sector institutions are doing a better job keeping students out of default – both interms of the rate and total number of defaulters.
The overall percentage of students that entered default within three years of leaving school declined from 13.7 percent to 11.8 percent in the latest release of data. This drop was driven by declines across all sectors, but not all sectors contributed evenly.
The default rate among private sector institution students declined 3.3 percentage points, compared to a 0.4 percentage points at private non-profits and a 1.2 percentage points at public institutions. And, in terms of overall students in default, only private sector institutions saw a decline.
A more granular look at the data reveals a more striking trend.
Compared to community colleges, which serve a similar student population as the private sector institutions, private sector institutions have far better default rates.The graph below shows, 19.1 percent of students who leave community college default within three years, compared to 17.7 percent of students at 2-year private sector institutions.
Both institutions serve a comparable population of new traditional students, but, perhaps owing to the difference in graduation rates between the two sectors, private sector institutions do a better job of serving their student population.