Sunday, Nov. 30, 2008 | 2 a.m.
In Today's Sun
Beyond the Sun
Why are students borrowing so much today? And what relief is there for students struggling to repay their loans? To learn more about these subjects, visit the following Web sites:
A pair of College Board reports show how the cost of attending college has escalated over the years and how students are financing their educations.
Trends in college pricing:
Trends in student aid:
The "cohort default rate" the U.S. Department of Education releases annually measures the percentage of federal student loan borrowers who begin repaying their debt in one fiscal year and default before the end of the next. The Department maintains a database that allows anyone to search for schools' default rates.
In the midst of an economic downturn, more borrowers are having trouble repaying loans.
The nonprofit Project on Student Debt has information on an income-based repayment plan set to roll out in July 2009 that will cap monthly payments for many federal student loan borrowers:
USA Funds, a student loan guarantor, has information on repayment options for borrowers struggling to repay loans in the federal program:
THINKING ABOUT BORROWING?
Learn more about federal student aid programs including loans and grants:
The nonprofit Project on Student Debt has advice for borrowers, along with reports on financial aid:
The latest numbers from the federal government show Nevadans who began repaying federal student loans in fiscal 2005-06 defaulting at higher rates than borrowers in 45 other states.
Having the nation’s fifth highest default rate sounds like bad news. But after four years at the top of the list, falling to No. 5 was a step in the right direction.
“It validates all the hard work that the institutions are doing,” said Sharon Wurm, director of financial aid for Nevada’s public college system.
The federal student loan program allows students and parents to borrow from the government or from private lenders whose loans the government promises to back.
The “cohort default rate” the Education Department releases annually measures the percentage of federal loan borrowers who begin repaying in one federal fiscal year and default before the end of the next. Defaulters are at least 270 days delinquent on payments.
Nevada’s latest rate, for borrowers who began repaying between October 2005 and September 2006, was 7.4 percent.
Wurm said about six years ago, using information loan guarantors provided, state colleges began reaching out to borrowers late on payments via letters, e-mail and phone calls before they defaulted — a change from past years when schools would find out former students were in trouble only after they defaulted.
Though lenders and guarantors also contact debtors, students often trust schools more, Wurm said.
Once in touch with borrowers, staff members discuss ways to avert default. Borrowers facing certain economic hardships can request to have federal loans deferred or file for a “temporary forbearance,” a more short-term postponement and/or reduction in their required payment amounts.
Why Nevadans have such a poor track record of repaying on time is a bit of a mystery.
Low graduation rates are probably one contributor. An analysis of recent defaulters from the state’s public colleges shows just 13 percent graduated from the institutions they attended.
Beyond that, Wurm said, higher education officials have little data on what types of students are most likely to default. She suspects, however, that one reason so many do in Nevada is students’ tendency to change addresses frequently.
Indeed, Bob Murray, spokesman for USA Funds, the largest guarantor of federal student loans and a major guarantor in Nevada, says employees prevent almost all borrowers they locate from defaulting.
In Nevada, as in other states, community colleges tend to have higher default rates than four-year schools, a disparity due in part to the value of degrees schools offer.
As Murray explained in an e-mail, “a graduate with a master’s or bachelor’s degree from a four-year institution is likely to have better earning prospects than a graduate with an associate degree.”
Students of for-profit schools offering certificates and two-year degrees tend to default in greater numbers, too, which Murray thinks is another factor driving Nevada’s default rate.
“Compared with other states,” he wrote in the e-mail, “Nevada has a significant proprietary school segment.”
The latest default rate for Kaplan College, a for-profit institution on Spring Mountain Road that offers one-year programs in fields such as medical insurance coding and billing, is 18.9 percent — one of the highest for schools that report rates in Nevada.
About 90 percent of Kaplan College students take out loans, with the average amount being $6,000, said Caitlin Tridle, spokeswoman for Kaplan Higher Education, which owns Kaplan College. Graduates’ annual starting salary averages $23,629. About 60 percent of defaulters are dropouts.
Carmen Torres, Kaplan College’s director of finance, said after arriving at the school 2 1/2 years ago, she began requiring externship students to attend an extra financial aid session. At these meetings, students plug lenders’ phone numbers into cell phones so they can call to update contact information when they move.
Other changes, such as asking the staff to confirm students’ addresses frequently, have been simple. The school now displays information in a lounge on the consequences of defaulting.
The government, which can seize tax refunds and garnish portions of defaulters’ wages, collects on more than 98 percent of defaulted federal loans.
With economists predicting a deep and prolonged recession, the ranks of defaulters are expected to grow.
That could be particularly true for hard-hit Nevada, where the chancellor of the public higher education system has called for tuition increases of 25 percent to help plug budget holes. Such hikes could drive students deeper into debt.
But the struggle to find money for college is not unique to Nevada.
With rising costs forcing students nationally to choose between forsaking top-choice schools or borrowing tens of thousands of dollars, some politicians and educators say financial aid is too heavy on loans.
“We don’t care about poor people and we’re not willing to make the commitments, the sacrifice, the investment, to give them a higher education so they can become productive members of society,” said Tom Mortenson, a senior scholar at The Pell Institute for the Study of Opportunity in Higher Education and a higher education policy analyst for Postsecondary Education Opportunity. “We really do have to put cash upfront for those who need it in a way that doesn’t encumber their future.”
A College Board analysis shows that the average borrower graduating with a four-year degree in the 2006-07 school year had $22,700 in student loans, up 15 percent from 2002-03 after adjusting for inflation.
Loan proponents, pointing to increased earnings, say most college graduates can manage debt they accrue. In 2007, bachelor’s degree holders’ median salary was about $51,300, topping high school graduates’ by about $20,000, the Bureau of Labor Statistics reports.
But with so many defaulters being dropouts, Mortenson thinks colleges must do more to improve graduation rates.
The public college system’s analysis of recent defaulters showed that just 4 percent of those from the College of Southern Nevada graduated from the institution, no surprise given its 10 percent graduation rate.
At 49 percent, Kaplan’s graduation rate is better — higher than even UNLV’s, but still wanting.
To help students succeed, the school offers free tutoring.
Because poor attendance is a common reason students fail, instructors contact students who miss class to encourage them to return to school. After two consecutive absences, program directors telephone. The college also uses certified mail and text messaging to reach absentees.
These and other initiatives have helped reduce absenteeism by 13 percent since July 2007. But whether improved retention will affect default remains to be seen.
Perhaps the key to lowering default rates is gaining a better understanding of who is most likely to default.
That is the subject Christopher Kypuros, a doctoral candidate in UNLV’s higher education leadership program, is exploring in his dissertation.
Kypuros is examining the age, major, ethnicity, gender, loan indebtedness and other characteristics of students at each of six public colleges in Nevada between 1995 and 2005. The objective is to see how these factors affect default.
“I’m hoping this information will help institutions place more attention or more emphasis on the type of student that’s more likely to default,” Kypuros said.
“My hope,” he said, “would be to find out what the core is — what the root of the problem is statewide.”