Student loan default rates rise
By Andy Garrison
April 15, 2013
The most recent available data shows Missouri Western students’ loan default rate has tripled in just four years.
This problem is not only unique to Western, as default rates all over the country are climbing. However, the folks at financial aid here on campus are instituting a lot of new programs to keep students up-to-date on their loans and out of collections.
The default rates on loans come out every three years so the 2013 release is still a draft and not public. The most recent trends though show that between 2006 and 2009, the rate here went from only 6 percent to 19.9 percent.
Default rates are so important to our campus because high numbers can lead to federal cuts. Marilyn Baker, director of financial aid, explains.
“We take our default rates seriously,” Baker said, “because it can jeopardize our federal funding if our default rate continues to rise.”
And while the most recent rates are unavailable, it was hinted that the rates are still trending upwards for this past three-year period.
Financial aid isn’t taking it on the chin. They have put into place some progressive programs to help students when it comes time for repayment.
“One [program] that we are focusing on right now and encouraging students to check into is called Income Based Repayment Plan,” she said. “Say that student who borrowed $57,000 can’t afford to make that $600.00 payment, then this income-based repayment plan is a great option for them to check into.”
This program will help out a lot of students who are worried about having to knock out their loans in such big payments. One MWSU senior, who is graduating with about $57,000 in loans, is worried about just that. Rochelle Whitman explains her doubts about her salary being able to keep up with her payments at first.
“Probably not in the beginning,” she said. “I’d say probably not for the first five years because you have to start on the bottom; no, I don’t think so, I hope it pays off in the end.”
The financial aid department also encourages students to return for help if needed even after they graduate, Baker explains.
“Hopefully more and more [graduates return for help],” she said. “We definitely want them to understand that option is there because the student loan repayment process is confusing.”
Financial aid can help former students navigate the process for the best possible results and have people in place to do so.
“We definitely want them to know that we do have people on staff who understand those repayment plans; have worked with the servicers,” Baker said. “People who are willing to do three-way calls with the servicers with the student, to be there with them.”
Student loans are backed by the government and so they are not going to go away in a bankruptcy. Associate Director Cindy Spotts-Conrad explains the importance of keeping aware of what we owe.
“The most important thing for students to know is don’t ignore it,” she said. “These loans are serious, you are owing money to the government; this debt is serious debt because, if you read the news stories, they are garnishing social security when people retire.”
In the income based program, sometimes, depending on income and house-hold size, a payment of $0.00 is accepted as an actual payment and keeps the account in good standing as long as the student is in the program.
“The more we can get people to understand that, really, keeping your account in good standing does not necessarily require payment,” she said. “And that is just so important because we care about our students, we don’t want to see anyone out there who is financially devastated by a student loan.”
It is possible to bypass the student loan office and go straight to the servicer, but to navigate the system and make sure students get the best information and services they should go to financial aid before calling. Spotts-Conrad explains why.
“The federal servicers should offer similar service plans but, if they don’t, that doesn’t mean the student doesn’t have the right to that” she said. “So that’s why we want to make it very clear to our students that those exist; if they say I need to repay on an income based or a pay as you earn then that servicer would need to respond. That’s the law.”
Baker also warns that students shouldn’t accept their entire loan if they don’t really need it.
“Hoping that they put more thought into the process of accepting the student loans,” she said. “Instead of just click, click, click, hit accept, okay, I’m done and I get a refund of $3,000 and go out and spend it however they spend it.”