Tips to Avoid Defaulting on Your Student Loans

As more and more college graduates are faced with an increasingly competitive job market, the number of student loans going into default is also seeing higher numbers. According to the U.S. Department of Education, student loan default rates rose for borrowers at public and private schools. Borrowers at for-profit institutions saw the highest increase in default, from 11.6% to 15%. According to, more than approximately 320,000 students at for-profit schools defaulted on their student loans after two years.

The consequences for defaulted loans affect not only student borrowers, but institutions as well. Students who are unable to keep up with their loan repayments face low credit ratings and can be prevented from borrowing loans in the future, while institutions with high default rates can lose their eligibility to participate in federal student loan programs.

These numbers heavily affect students at online and for-profit schools, as roughly 92% of learners borrow through student lending programs, according to As compared to the number of students who borrow from public colleges and universities (27%) and private institutions (62%), students who attend online colleges that are also for-profit have a higher chance of defaulting on loans. Students attending online colleges should be aware of the risks of borrowing, and here are a few tips for avoiding default on student loans after graduation:

Before you borrow, apply for scholarships, fellowships, and grants. Resources such as and can help students find additional financial aid that they won’t have to repay after graduation.

If you must borrow, utilize federal loans first. Federal student loans have lower interest rates and more flexible payment options. Due to the scarcity of jobs and the increase of loan defaults, the Obama Administration and the U.S. Department of Education have created more viable repayment options for federal loans, such as the Income Based Repayment option, which allows students to pay their loans in installments based on their monthly salary earnings.

Finally, if you’ve exhausted all of your federal student loan options, use caution when borrowing from private lenders. Private loans usually come with higher interest rates and do not have the same flexibility as federal loans when it comes to repayment choices. Be wary of predatory lenders who will expect loans to be repaid regardless of whether or not you’re employed. Some may not allow you to postpone or defer your loans or put them in forbearance, which means that you will be unable to make any adjustments to repayment, such as smaller payments or extending the length of your repayment. Without these options, students can go into default faster.

It is important to keep in mind that today’s graduates from online schools may face student loan debt without having the same employment opportunities as they did in the past. Before you borrow any student loans, be aware of your options so that you can avoid becoming another statistic.


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