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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Medical Residents Losing Ability to Defer Student Loans for 'Economic Hardship'

Student Loan Girl — Tue, 10 Jun 2008 23:50:00 GMT

Beginning next year, medical school residents will no longer be eligible to defer their federal student loans because of new criteria the government will use to determine “economic hardship,” according to an article in the American Medical News (“New Rule Excludes Medical Graduates from Federal Loan Deferment Plan,” June 16, 2008).

An economic hardship deferment allows students with a high debt-to-income ratio to postpone their federal student loans for up to three years, during which time the government pays the interest on any subsidized student loans. According to the Association of American Medical Colleges, medical school students typically graduate with about $140,000 in college loans, $34,000 of which are subsidized loans.

Based on the new deferment eligibility criteria established by the U.S. Department of Education, a borrower’s debt-to-income ratio will no longer be taken into account. About two-thirds of medical school graduates qualified for deferment under the previous eligibility criteria.

The new definition of economic hardship, which takes effect July 1, 2009, only considers a borrower’s income for qualification, which is limited to $15,600 a year or less. Under the previous criteria, a medical resident making $45,000 and carrying at least $76,000 in debt generally qualified for economic hardship deferment.

To help students affected by the new rules, the Education Department will debut an income-based repayment program next July.

Medical residents, whose income is not over 150 percent above the poverty line for their family size, can have their loan payments capped at 15 percent of their income under the new program.

Once the government’s new criteria takes effect, a medical graduate who earns $45,000 — the average salary for first-year residents — would be required to make monthly payments of $365. As residents earn more money each year, their monthly payments would likely increase.

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Student Loan Blog : student loan deferment

Student Loan Default Rates In Nevada Rank Among Top In Nation

Medical Residents Losing Ability to Defer Student Loans for 'Economic Hardship'