"Low interest rates and strong program management are some of the factors that have resulted in an all-time low in student loan default rates--5.2 percent," U.S. Secretary of Education Rod Paige said today as the department released the national cohort default rates for FY 2002, the latest year for which data are available.

Paige said that a number of factors have contributed to the lower rate. Schools and partners in the student loan industry have made debt repayment a priority, and interest rates are at historic lows. In July, student loan interest rates dropped to 3.37 percent--the lowest in 35 years--saving student loan borrowers millions of dollars and making repayment more affordable.

Paige also noted that the Federal Student Aid (FSA) office has improved service to students and parents as well as strengthened overall management of student aid programs. As the first Performance-Based Organization in the federal government, FSA:

• has been working with its student aid partners to increase efforts to identify borrowers who may need repayment assistance and to discuss consolidation and other options before the borrower goes into default;
• increased total FSA-held default collections by 160 percent to $1.8 billion;
• instituted sound financial management and internal controls that resulted in unqualified audit opinions on both FSA's and the department's financial statements for FY 2002 and FY 2003;
• began implementing the Common Services for Borrowers solution--integrating four legacy systems into a single, unified system, which will save taxpayers $1 billion over the life of the contract;
• increased electronic filings of Federal Applications for Financial Student Aid (FAFSA) to nearly 80 percent of the 13 million applicants; and
• received high marks for customer satisfaction, second only to Amazon.com on the American Customer Service Index.

"FSA's efficiency and better business processes have decreased the cost to taxpayers of delivering student aid to our customers and have earned recognition from the public and private sectors," Paige said.

President Bush's FY 2005 budget request would increase federal grant, loan and work-study programs to more than $73 billion--a $4.2 billion or 6 percent increase over 2004 levels. Almost 10 million students and parents--a 426,000 increase--would receive one or more grants, loans or work-study awards.

Borrowers needing assistance on repaying their student loans should contact the holders of the loans to learn about repayment options. For help locating their loan holders, borrowers may access www.nslds.ed.gov or contact the department's Federal Student Aid Information Center at 1-800-4FED-AID (433-3243).

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NOTE TO EDITORS: The FY 2002 default rates released today represent the most current data available and include data on borrowers who attended some 5,955 schools that participate in the Federal Family Education Loan and William D. Ford Federal Direct Loan programs. The FY 2002 default rate is the percentage of borrowers who began repaying their loans between Oct. 1, 2001, and Sept. 30, 2002, and who defaulted before Sept. 30, 2003.

Individual school default rates are posted on the department's Web site at http://www.ifap.ed.gov/DefaultManagement/DefaultManagement.html.

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