<p>"Keeping loan default rates low, a new study of nine community colleges shows, is not rocket science: Schools can do it."</p>
<p>Student loan defaults can have severe consequences for students long after they are done with school. The New York Times Editorial Board discusses new federal rules that attempt to regulate colleges in order to keep default rates down. How practical is this proposed solution in helping students not fall into default?</p>
<p>I work really, really hard to keep my school’s default rate down. In addition to one-on-one counseling with current students, I reach out to every former student who has late payments, providing information about options for repayment. Unfortunately, some still totally ignore my communications and the servicer’s communications. It’s incredibly frustrating. Yes, as a financial aid administrator I do have the responsibility to educate my students … I do that. In the end, though, I cannot force them to pay up. I am fortunate, as my school has a low default rate. However, I realize how little “I” am in control in the end.</p>
<p>But I do agree that schools that work to educate their students about budgeting, borrowing and repayment … and schools that have programs in place to encourage academic success … will most likely have lower default rates than they otherwise might.</p>
<p>We work really hard at this at the school I work for as well. We attempt to provide exit counseling in person, we have a team that works with any former students who have missed a payment, We counsel them to borrow as little as possible. One big problem is that when they run into finanicial issues, they stop responding to outreach from us and the lender/servicer. They don’t realize how many options there are to keep out of default. The best way to reduce defaults is to keep students in school so they actually get their degree. Graduates default less often than those who leave without a degree.</p>
<p>Should students who require remedial coursework even be allowed to take student loans? I’m not convinced that is at all a good idea.</p>
<p>Right now, everyone gets a loan, no qualifications, no credit check, no co-signers. If the schools are going to be punished if the student defaults, they should have some say, other than who they admit, in that credit decision. A student who might be on the line who needs financial aid might be passed over for a wealthier applicant.</p>
<p>Is that what we want? Poor kids kept out because statistic show the needy student who is going to a not-so-top college in a not-so-in-need major is 100% more likely to default than the wealthy student who didn’t need to borrow in the first place.</p>
<p>@kelsmom, what you do is fantastic - but quite frankly, much more than what most colleges do when it comes to student loans. I have a very reasonable student loan debt especially given that I have a PhD, but I have friends who borrowed way more than they could reasonably expect to repay even with a sweet job straight out of college. In college my face-to-face meetings with financial aid counselors involved 10 minutes for me to basically sign on the dotted line. Many of my friends received no counseling, no orientation, no face-to-face meetings with their financial aid counselor. My husband borrowed in excess of $100K for undergrad, in a combination of private and federal loans. His elderly grandmother, now deceased, cosigned for him. While the blame rests primarily on him, I wish some financial aid counselor had at least expressed a modicum of concern for how he was going to repay those loans. (He ended up dropping out and joining the Air Force. He’s back in school now to finish his BA on the GI Bill…but we still have the debt.)</p>
<p>Is that what we want? Poor kids kept out because statistic show the needy student who is going to a not-so-top college in a not-so-in-need major is 100% more likely to default than the wealthy student who didn’t need to borrow in the first place.</p>
<p>Um, that’s not what they show. The article doesn’t even discuss majors; it says that students who need remedial classes are more likely to default than students who don’t. Yes, poor students are more likely to default than wealthy students, but the majors aren’t mentioned.</p>
<p>Some colleges argue that the regulations unfairly target and penalize schools that serve “high risk” populations like the poor and young people who need remedial help. A study of nine community colleges carried out by the Association of Community College Trustees and the Institute for College Access and Success, a nonprofit research group, rebuts that argument.</p>
<p>They are the ones who LEAST need to go into default. If your college services low-income students and you have more than a 30% default rate, you’re doing them a disservice. That means that they are getting a college education and STILL don’t have the skills necessary to land a job that enables them to repay their debt…or that the college is saddling them with way more debt than they can reasonably repay.</p>
<p>Get to the root of the problem, college tuition is highly inflated for too many reasons correlated to generating revenue, and not optimizing educational value.</p>
<p>Sohoist - really great post and important to recognize. The big problem I have been reading about is that 80% of defaults are from students who did not graduate. Given that 40% of students who start college don’t complete it - it seems like there should be limits to how much a student can borrow if they are unlikely to graduate. Not how to do this - but it would help in the long term.</p>
<p><a href=“Official Cohort Default Rates for Schools”>http://www2.ed.gov/offices/OSFAP/defaultmanagement/cdr.html</a> points to a searchable database of default rates by school.</p>
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<p>I have a much simpler solution that would eliminate the need for the federal gov’t to spend time, energy & taxpayer money to monitor colleges: Make the colleges co-sign the student loans, instead of the parents. </p>
<p>Then you’d see colleges:
<p>Sure, you’re about to argue whether it Is it fair to steer poorer students from Gender Studies or Aboriginal Studies. You should be pragmatically asking: can poorer students really afford to leave college with a degree in Gender Studies or in Aboriginal Studies?</p>
<p>Right now for colleges, it’s HEADS I win/ TAILS you lose. – kinda like investment bankers who make money off their clients no matter what happens to their clients’ money.</p>
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<p>Poorer students are probably more likely to choose pre-professional majors anyway. However, not all pre-professional majors have good job prospects at graduation.</p>