College loan picture improves

Friday, Jan. 10, 1997 | 11:59 a.m.

Touting a record-low college loan default rate, President Clinton is calling for more education tax breaks in his quest to be remembered as "the education president."

The Education Department reported a fiscal 1994 default rate at 10.7 percent.

It is the lowest rate since the department began reporting it in 1988 and a 40-percent drop since Clinton took office in 1993.

The high was 22.4 percent in 1990.

Rates for Clark County institutions have been less dramatic, but follow the national downward trend.

UNLV's financial aid department reports that their default rate has fallen consistently, while the Community College of Southern Nevada has fluctuated over the past few years.

In 1992, UNLV's default rate was 9 percent, falling to 6 percent by 1994. CCSN's rate was 7.8 percent in 1992 and 8.8 percent by 1994.

During the 1994-95 school year, UNLV handled about $19 million in loans and CCSN handled about $290,500. Both institutions are currently compiling data on 1995.

But the most recent estimates compiled by the Department of Education show the actual dollar losses from student loan defaults fell to $249 million in 1996 compared with $1.7 billion in 1992.

Clinton used the news to trumpet his proposed education package, which would add $42 billion to education spending over five years. The package includes a 50 percent subsidy for reconstruction of older schools, building a troop of 1 million volunteer reading tutors, and tax breaks.

"The bottom line is this report shows our strategy of opportunity and responsibility is working," Clinton said at a news conference with Education Secretary Richard Riley.

They credited a crackdown on delinquent borrowers by the administration, Congress, schools, lenders and student loan guarantors.

But the default rate and estimated savings figures do not include money lent under the Clinton administration's new direct-loan program, which-provides billions of dollars in loans. Under direct lending, the Education Department, not banks, collects repayments and deal with defaults.

The department says the volume of student loans rose from $12.3 billion in 1990 to $23.1 billion in 1994, because of more borrowers, and in some cases, larger loans.

However, the amount of money collected on defaulted loans doubled from about $1 billion in 1992 to $2.2 billion in fiscal 1996.

As for this year's education agenda, Clinton said expanding education tax breaks was a priority and he felt sure that the Republican-led Congress would pass his initiatives.

During his re-election campaign, Clinton proposed these two tax breaks to help students from middle-income families afford a college education:

* Hope Scholarships, to make two years of college or vocational training as accessible as high school. In the first year, students or their parents would receive a $1,500 tax credit. Those whose taxes amount to less than that amount would get a check from the government. A second $1,500 credit would be available if the student earns a B average and is drug-free.

* Up to $10,000 annual tax deduction for tuition costs for students not using the tax credit.

To accomplish that goal, the president expressed a willingness to negotiate with Congress on a plan to balance the budget by 2002.

Clinton said the budget will show that, "I am making a clear effort to reach out to them, to meet them halfway, and to get this job done."

Clinton made his remarks in the Oval Office, where he appeared with a half-dozen college students. He noted that government-backed loans helped pay for his own college and law-school education.

"I wouldn't be here without the good graces of the government," said University of Michigan junior Fiona Rose. Her student loans, she said, "made it possible for me to focus more on the textbooks and less on the bank books."

Many trade schools that had high default rates -- over 25 percent -- have been expelled from national student-aid programs, and rules now allow wages to be garnisheed or tax refunds withheld from defaulters.