Despite
recent economic swing default rates for
college student loans remain steady
(AP)
-- The default rate on federally backed
college loans hit an all-time low during
the 2001 fiscal year, the Education Department
said Tuesday.
The
department said only 5.4 percent of college
graduates who began making payments in fiscal
2001 defaulted on their debt. In the previous
fiscal year, 5.9 percent of students with
outstanding loans defaulted.
Tuesday's
announcement stands as something of a contrast
to two recently published reports that indicate
college debt is resulting in long-term financial
problems for many Americans. Even so, Education
Department officials heralded the 2001 results.
''Some
of us have been around long enough to remember
when we dreaded these announcements,'' said
Sally Stroup, assistant secretary for postsecondary
education. ''That is no longer the case.''
The
peak default rate, 22.4 percent in 1990,
occurred before federal legislation curtailed
student loan abuse by beauty colleges, truck
driving academies and other trade schools.
Department
officials attributed the drop in defaults
to improved credit counseling, more flexible
repayment schedules and low interest rates.
While
the 2001 findings do not measure the consequences
of major tuition increases imposed by many
colleges and universities over the past
two years, Stroup does not expect the tuition
hikes caused default rates to rise.
''You
can only borrow so much money regardless
of where tuition goes,'' Stroup said. ''There
are limits that can control how much people
can borrow.''
In
addition to loan limits, Mary Mowdy, the
executive director of the Oklahoma Guaranteed
Student Loan Program, said borrowing on
an as-needed basis is key to avoiding devastating
post-graduation debt.
''Just
because a financial aid office says you
can borrow 'X' amount of dollars doesn't
mean you have to take those dollars,'' Mowdy
said.
Using
statistics from schools and lenders, the
Education Department's default rate is based
on the number of students who go 270 days
without making a payment during their first
year of repaying a student loan.
In
2001, 5.7 million students obtained $39.7
billion in federally backed loans.
A
Cambridge Consumer Credit Index survey issued
earlier this month found that outstanding
college debt hampered the ability of 68
percent of graduates with student loans
to make major purchases like homes or automobiles.
Jordan
Goodman, a spokesman for the index, said
22 percent of all Americans now carry student
loan debt, up from 18 percent from last
year.
And
a poll conducted by Harris Interactive for
Collegiate Funding Services -- an education
finance and debt management corporation
-- revealed that 55 percent of college graduates
are having problems meeting their financial
goals because of student loan debt.
An
adjustment of career plans is one way some
graduates are coping with the crunch.
''My
budget is tight, very tight,'' said Jill
Deutscher, a Chicago high school teacher
who said loan debt played a role in her
decision to work summers and accept a higher-paying
position in an urban school district, as
opposed to lesser salary in a small town
school system.
But
while a $128-per-month consolidated loan
payment cuts heavily into her living expenses,
Deutscher -- a 2002 graduate of Illinois
State University -- said the $17,000 she'll
repay over 10 years is worth every penny.
''Without
my education, I never would have been able
to do what I do,'' she said.
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