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National student loan default rate lowest in 10 years

The U.S. Department of Education reported last week that the national student loan default rate dropped to its lowest point in 10 years, and UA students are paying their loans back at an even better rate.

U.S. Secretary of Education Richard Riley said Tuesday the national student loan default rate dipped to 8.8 percent for the 1997 fiscal year, the lowest point since the federal government began keeping track in the 1987 fiscal year. Records from the 1997 fiscal year are the most current available.

The University of Arizona's student loan default rate was 6.3 percent for the 1997 fiscal year, according to Department of Education statistics.

John Nametz, UA director of financial aid, said he thinks UA students have always repaid their loans at a better rate than the national average.

"We have good students and we trust them," Nametz said.

If UA students keep their default rate under 10 percent for three consecutive years, loans will be disbursed faster and funds will not be withheld from first-time borrowers for an extended period of time, the Department of Education's website states.

UA students' loan default rate for the 1996 fiscal year was 6.8 percent and 6.3 percent for the 1995 fiscal year.

He also said a low default rate for UA students will establish credibility when searching for jobs or entering a debt agreement like buying a car.

"It sends a really healthy message," Nametz said.

Jane Glickman, a Department of Education spokeswoman, said the national student loan default rate has dipped due to a commitment by her agency, schools and loan institutions, as well as a stable economy.

"Everyone's pitched in," Glickman said. "It's been a real priority and credit to the American taxpayer."

She said the Department of Education has created more realistic monthly payment plans that match student income, called the Income Contingent Repayment Plan.

If students don't repay their loans, Glickman said possible repercussions are to have wages garnished, income tax refunds withheld or a denial of future financial aid.

Schools with a default rate higher than 25 percent can lose student financial aid programs, according to the Department of Education's website. More than 40 schools this year can lose their loan eligibility.

The national default rate peaked at 22.4 percent in the 1990 fiscal year, according to statistics from the Department of Education's website. The rate has declined every year since.

Students have received about three times as much aid since the default rate peaked 10 years ago. Students received $11.7 billion in loans in the 1990 fiscal year and about $34 billion in loans in the 1997 fiscal year.

Nametz said 72 percent of UA students enrolled in the 1998-99 academic school year received some form of financial aid.

UA undergraduates who graduated in May and received financial aid ended their college career with an average of $17,143 in loans, he said.

Psychology junior Andrea Soule said she expects to take at least 10 years to pay back her student loans.

"I don't worry about it too much," Soule said. "I'm sure I'll pay it off somehow."

Business junior Ido Beneli said he thinks the Department of Education's policies are reasonable, like when he was allowed to defer loan payment while he took time off school.

"I think it is pretty fair - maybe more than fair," Beneli said.