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Families and students assessing potential colleges should tread lightly when reviewing their student loan cohort default rates. The number colleges publish, known as the cohort default rate (CDR), covering graduates during their first three years of repayment, may be misleading.

According to a new report from the Government Accountability Office, some schools have hired consultants that encourage borrowers with past-due payments to postpone future payments by putting their loans in forbearance to avoid default. During forbearance interest continues to accrue, which ends up costing borrowers more money that if they had put the loans in deferment, where interest doesn’t accrue on federal subsidized loans, or had enrolled in an income-based repayment plan.

A typical borrower with $30,000 in loans who spent three years in forbearance would pay an additional $6,700 in interest, according to the GAO.

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Bernice Napach

Bernice Napach is a senior writer at ThinkAdvisor covering financial markets and asset managers, robo-advisors, college planning and retirement issues. She has worked at Yahoo Finance, Bloomberg TV, CNBC, Reuters, Investor's Business Daily and The Bond Buyer and has written articles for The New York Times, TheStreet.com, The Star-Ledger, The Record, Variety and Worth magazine. Bernice has a Bachelor of Science in Social Welfare from SUNY at Stony Brook.

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