be in default

Romanian
#1
Hello everyone,

I'm taking a practice test for the GMAT, and I came accross a strange use of "in default".

"Graduate schools have begun to check whether applicants for admission are in default on government-guaranteed student loans." Later on, it continues with "[..] it is thought that the 3 percent of the applications that fail represent only three-quarters of the incoming applications from individuals in default. Consequently, approximately 1 percent of the applications that are processed are those of applicants in default [..]."

I understand that the first default refers to people that benefit from the government loans. However, the second and third usages make me think that it actually refers to the students left out of the program. Does this in default mean "left out of the program" throught the entire passage?

Could anyone spell more light on this?
 
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