Student Loan Default Reduction Act

Student Loan Default Reduction Act - Amends the Higher Education Act of 1965 to set forth provisions relating to default rates under the guaranteed student loan program.

Allows a guaranty agency, after notice and opportunity for a hearing, to cease to provide insurance for student loans at an otherwise eligible institution if the cumulative default rate of loans from such institution in repayment: (1) exceeds 30 percent of the amount of all guaranteed student loans at that institution insured by all guaranty agencies before October 1, 1991; and (2) exceeds 25 percent of the amount of such loans after September 30, 1991. Provides for reinstatement of such loan insurance if the eligible institution reduces the default rate. Allows the guaranty agency to enter into agreements whereby the eligible institution may make principal and interest payments on defaulted loans in order to reduce such default rate.

Requires eligible institutions which have guaranteed student loan default rates in excess of 30 percent to endorse such loans.

Makes change of address or status notice requirements applicable to borrowers and institutions both during and after enrollment and attendance.

Requires (currently authorizes) guaranty agencies to furnish eligible institutions, upon request, specified information on students who are delinquent or have defaulted on guaranteed student loans. Requires that such information include names and addresses of such students. Requires the eligible institutions to review the names and addresses and report corrections to the appropriate guaranty agency.

Authorizes guaranty agencies to request from eligible institutions information on student withdrawals, default rates, admissions policies, and placement rates.

Requires eligible lenders to furnish to appropriate eligible institutions lists of names of student borrowers who are delinquent in repayment of guaranteed student loans, their last known address, and the amount of the loan in delinquent status.

Requires eligible institutions to report to eligible lenders on the last known address and subsequent change of address of all student borrowers who are delinquent or in default on repayment of guaranteed student loans.

Lowers from 100 to 95 percent the portion of the loss resulting from the default of a student borrower for which the Secretary of Education (the Secretary) must reimburse a guaranty agency under the guaranteed student loan program.

Directs the Secretary, through the Division of Eligibility and Certification of the Office of Postsecondary Education, to review the default rates of eligible institutions under the guaranteed student loan program at least once in every 12-month period and notify any institution with a cumulative default rate of 30 percent or higher for loans before October 1, 1991, and 25 percent or higher for loans after September 30, 1991, that it is likely to be placed on probation and is, after notice and opportunity for a hearing, subject to loss of its status as an eligible institution for up to one year. Authorizes the Secretary to carry out such suspensions. Requires the suspended institution, in order to be reinstated, to demonstrate that it has taken actions to reduce its default rate.

Directs the Secretary annually to publish data showing default rates by eligible institutions, guaranty agencies, and eligible lenders.

Requires eligible institutions under the guaranteed student loan program to have policies of substantial tuition refunds to students who withdraw from the program after an enrollment period of less than seven days.

Revises the definition of administrative costs of supplemental preclaims assistance to exclude reference to preclaims assistance which is merely permitted, rather than required, under specified provisions.