Students Increasingly Choosing Private Student Loans

Student Loan Girl — Wed, 22 Apr 2009 22:39:00 GMT

According to analysis of Department of Education data released last week, the number of college students taking out private student loans over the last five years has risen sharply. Analysis by student advocacy group The Project on Student Debt revealed that the percentage of all undergraduates who took out private student loans last school year jumped to 14 percent from 5 percent during the 2003–04 academic year (“New Data Show Big Increases in Private Student Loan Borrowing,” The Project on Student Debt press release, April 21, 2009).

The data showed that students attending schools that charge more than $10,000 in tuition and fees were more likely to use private student loans than were students attending less costly institutions. In fact, these for-profit colleges and universities saw the percentage of students who took out private student loan skyrocket to 42 percent last year compared to 13 percent five years ago.

The Project on Student Debt also found that slightly more than a quarter of private student loan borrowers didn’t take out federal student loans: 14 percent didn’t even apply for federal financial aid, and 12 percent filled out the Free Application for Federal Student Aid but chose not to take out a federal Stafford student loan.

These federal student loan statistics are particularly concerning, said Laura Asher, acting president of the Institute for College Access & Success, which runs The Project on Student Debt, because federal loans are available to nearly all students, regardless of their income, and because federal loans tend to have more favorable interest rates and repayment terms than private student loans.

“Too many students,” Asher said, “are missing out on federal loans and going straight to one of the riskiest borrowing options.

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Student Loan Default Rates In Nevada Rank Among Top In Nation

Student Loan Girl — Mon, 08 Dec 2008 11:55:00 GMT

After ranking number one in the nation for student loan defaults for the last four years, Nevada managed to come in fifth this year with a 7.4-percent default rate based on the Education Department’s data for borrowers who began repaying their loans between October 2005, and September 2006.

To combat the state’s consistently high default rate, state colleges have spent the last six years reaching out to Nevada’s federal student loan borrowers who are late on their payments before they default on their loans, said Sharon Wurm, director of financial aid for Nevada’s public college system (“Nevada’s Rate of Default on College Loans Among Highest In The Nation,” Las Vegas Sun, Nov. 30, 2008).

Because Wurm has found that students feel more comfortable discussing their student loan repayment options with their school than with their lender, her office now contacts borrowers by email, ground mail, and telephone to discuss ways students can avert default, such as economic hardship deferments and forbearances. These options allow students to temporarily stop making payments or make reduced payments on their loans.

“[Nevada’s recent ranking] validates all the hard work that the institutions are doing,” Wurm said.

State Lacks Student Loan Default Demographic Data

While Nevada’s outreach initiative may be helping to improve the state’s default rate, Wurm said the state has limited data on the types of students that typically default and the reasons why so many college students continue to default.

One reason, Wurm suspects, may be the state’s low graduation rate. Currently, just 13 percent of Nevada students graduate from the public college system.

In general, students who attend two-year colleges or for-profit schools that offer certificates tend to have higher default rates because they more frequently drop out of school and typically graduate with lower earning potential than students who graduate from four-year institutions.

At the Las Vegas campus of Kaplan College, a for-profit institute offering one-year programs for medical insurance coding and billing 90 percent of students take out student loans, but about 60 percent of students drop out before graduation and 18.9 percent default on their loans.

The College of Southern Nevada, which only has a 4-percent default rate, has been working to improve its retention rate by contacting students when spotty attendance — one of the most common reasons why students do poorly in their classes — first starts to become a problem. The school’s program directors attempt to contact students by phone, ground mail, or via text message, which has helped absenteeism at the school drop by 13 percent since July 2007.

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Student Loan Blog : Department of Education

Students Increasingly Choosing Private Student Loans

Student Loan Default Rates In Nevada Rank Among Top In Nation