The nation's student loan default rate has dropped to an all-time low of 5.4 percent, and for the first time ever, all schools have rates low enough to ensure they remain eligible for federal financial aid programs, Secretary of Education Rod Paige announced today.

"Today's news shows that student loan borrowers know the value of investing in their future and honoring their financial obligations," Paige said. "Our increased efforts are paying off—schools, lenders, guaranty agencies, servicers and the Department are working together and making diligent strides to assist students in meeting their repayment obligations."

Paige also applauded improved efforts by the financial aid community to counsel borrowers and to inform them of the numerous flexible repayment options designed to meet individual repayment needs.

The national default rate has dropped nearly every year since 1990, when it peaked at 22.4 percent. The FY 2001 rates released today represent the most current data available and include data on borrowers who attended some 6,200 schools that participate in the Federal Family Education Loan and William D. Ford Federal Direct Loan programs. The FY 2001 default rate is a snapshot in time of borrowers who began repaying their loans between Oct. 1, 2000, and Sept. 30, 2001, and who defaulted before Sept. 30, 2002.

Paige also said the Department has been working with its student aid partners to increase efforts to identify borrowers who appear to need repayment assistance and to generally improve the overall management of the student aid programs.

"A college education is a ticket to a better future," Paige said. "President Bush and I are doing everything possible to see that the college attendance rate continues to grow. We want to ensure access to college and career training by providing grants and low-cost student loans to help individuals finance postsecondary education for themselves and their children."

Paige noted that the current interest rates on federal Stafford loans are now at an all-time low of 3.42 percent, making loan payments more affordable than ever. As recently as three years ago, the interest rate was more than double—8.19 percent. The current interest rate on Parent Loans for Undergraduate Students (PLUS) has dropped to 4.22 percent—also the lowest rate ever.

The president's FY 2004 budget request would provide more than $62 billion in student aid to 9.2 million students, an increase of $3.1 billion from the previous year. The Pell Grant program would increase to $12.7 billion—$4 billion more than when the president took office.

In addition, working families will save more than $22.7 billion over five years for expenses related to higher education through the president's tax relief measures enacted in 2002.

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: Individual school default rates are posted on the Department's Web site at: http://www.ed.gov/offices/OSFAP/defaultmanagement/cdr.html.

Default Sanctions: FY 2001 marks the first time since 1989 that no schools are facing loss of eligibility in federal student loan programs due to high default rates.

The Higher Education Act of 1992 (P.L. 102-325) mandates that schools with excessive default rates may be dropped from one or more federal student aid program. Schools with default rates of 25 percent or greater for three consecutive years face loss of eligibility in the loan and Pell Grant program. Schools with a default rate greater than 40 percent for one year face loss of eligibility in the loan programs.

In the last decade, nearly 1,200 schools have lost eligibility to participate in the federal loan programs due to their high default rates.

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