Graduate schools have begun to check whether applicants for admission are in default on government-guaranteed student loans. Any application submitted by an applicant who fails this test is not processed. Though all applications are tested, it is thought that 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 who remain undetected.

Which of the following inferences about the consequences of instituting the new procedure is best supported by the passage above?

A. The rate of default on government-guaranteed student loans will probably increase by 1 percent.
B. The rate of default on government-guaranteed student loans will probably decrease.
C. The number of applications received by graduate schools will decrease.
D. The percentage of applications processed by graduate schools may decrease.
E. The percentage of loan applications from students applying to graduate school is likely to increase.

The OA is D

Source: Princeton Review