Defaults on federal student loans declined in 2013, for the first time in years, but they remained far above prerecession levels, the Education Department reported on Wednesday.  Among borrowers who were in their third year of repayment as of a year ago, 13.7 percent had defaulted, down from 14.7 percent in 2012. Previous years’ default figures were reported differently, but they showed a sharp increase through the economic downturn.  The department identified 21 schools whose default rates were so high that under federal law, they could lose eligibility to receive federal student grants and loans — effectively a death sentence for almost any postsecondary school. Twenty of the 21 schools are for-profit, and nearly all are small trade schools, rather than colleges. They can appeal the loss of funds.  Other schools also failed to meet the federal default standards, but the department tweaked its calculations so they would not face sanctions. Officials would not name the schools or say how many there were, only that there were fewer than those facing sanctions.  Former students’ loan defaults, along with employment rates and income, are seen as signs of how well schools prepare students for the job market. The government has become more aggressive about using such indicators to assess schools and penalize those that do poorly.  Some borrowers have multiple federal loans handled by different servicing companies; that practice is being phased out, with the goal that each student will make payments to just one company. Schools have complained that people with multiple servicers are especially likely to be current on some loans but not others, and to be counted as in default.  The department said it excluded those people from its calculations if including them would have put a school in violation of default standards. It said only about 400 borrowers had been removed from the figures as a result, out of almost four million.  Under the law, any school with a default rate of 30 percent or more for three consecutive years, or a rate of 40 percent for one year, faces the loss of access to federal funds. Over all, the default rate was 12.9 percent for students at public schools; 7.2 percent at private, nonprofit schools; and 19.1 percent at for-profit schools. All three figures declined from the previous year.  “The rate’s still much higher than it should be,” said Debbie Cochrane, research director at the Institute for College Access and Success, a research and advocacy group. “I don’t think we should be celebrating that colleges have fewer than 30 percent of their students defaulting. That’s a pretty low bar.”  In fact, the situation is worse than the numbers indicate. Borrowers are not counted as being in default until they fail to make payments for almost a year.  And while the government refers to a three-year default rate, it includes people who were in default after as little as two years. This year’s figure includes anyone who was supposed to begin repayment from Oct. 1, 2010, to Sept. 30, 2011, and had defaulted by Sept. 30, 2013.  A spokesman for the for-profit college industry argued that the government’s adjustment of figures for some schools underscored flaws in the way it judged performance. The Obama administration has been particularly critical of for-profit schools.  “It is notable and disappointing that the department continues to be opaque on how three-year” default rates are measured, said Noah Black, the vice president of the Association of Private Sector Colleges and Universities.  In the past, the Education Department judged schools’ compliance with default standards by how many people defaulted in less than two years, not three — a figure that climbed to 10 percent last year, from 6.7 percent in 2009. But government officials and consumer advocates said the two-year measure was too easy for schools to manipulate to make themselves look better, by having students categorized as deferring payment rather than defaulting until after the two-year mark.  Only a handful of schools faced sanctions under that standard. As of this year, federal law has switched to the tougher, three-year standard, leading to more schools’ possibly losing eligibility for grant and loan programs.  A version of this article appears in print on September 25, 2014, on page A19 of the New York edition with the headline: Number of Loans in Default Declines. Order Reprints|Today's Paper|Subscribe
It was the first drop in the default rate in years, but 21 schools still have rates so high that they could be barred from federal loan and grant programs.