 "Photo: Photo illustration by Lisle Alderton")
Rising costs of tuition and living expenses coupled with a slimming job market have caused K-State’s student loan default rate to almost double from 1.5 percent to 2.7 percent. However, K-State’s default rate average is considerably lower than the national average of 6.7 percent.
Defaulting occurs when borrowers fail to make loan payments for 270 consecutive days. According to the most recent statistics from the U.S. Department of Education, 135 K-State borrowers whose first loan payment came due between October 2006 and September 2007 defaulted by October 2008.
But the default rate is not the only rate that’s increased at K-State, so has the number of student’s needing financial assistance.
Larry Moeder, director of student financial assistance at K-State, said the number of financial aid applications is up 26 percent compared to last year.
“Students are taking out more student loans in the down economy,” said K-State Student Body President Dalton Henry. “As we see tuition continue to rise, we will continue to see students taking out more loans.”
Jahvelle Rhone, senior in sociology, said he had to take out about 25 percent more in loans this year than in previous years to cover rent, tuition and living expenses.
Among the most recent round of tuition hikes at the six state universities, K-State suffered the least with a 3.5 percent increase compared to Wichita State University, the highest at 8.5 percent.
“It was a very responsible decision by K-State,” Henry said. “We have tried to keep a K-State education affordable and accessible to students. We are trying to maintain affordability.”
Compared to other schools in Kansas, K-State’s default rate is considerably low with KU coming in at 2.6 percent at the lowest and Emporia State University at the highest with 5.9 percent.
Overall, 3.3 million student borrowers in the U.S. entered repayment during this period, and more than 225,000 went into default. The latest national loan default rate climbed to 6.7 percent, up from 5.2 percent the previous year.
INCREASING NEED FOR STUDENT LOANS
Moeder said K-State students borrowed $80 million last year in federal loans through the federal government’s Student Loan Program. That is a $5 million or 6 percent increase from the 2005 to 2006 academic year.
He said the federal government increased borrowing eligibility by an additional $2,000 a year to meet students’ financial needs.
Moeder said he believes this eligibility increase could attribute to some of the loan default rate increase. He said the number of students taking out private loans has increased as well.
Destinee Parker, sophomore in social work, said she had to take out loans to cover basic living expenses. She said she had a job earlier this semester but was forced to quit because she did not have enough time to study.
“You can say I am struggling right now without a job,” Parker said. “But I have to do well in my classes to get scholarships.”
FinAid.org, a financial aid information source, reports that two-thirds of graduates at four-year universities exit college with loan debt. The average debt of a college graduate now is $20,000.
Student loans more than doubled in the past decade, from $41 billion to $85 billion, according a 2008 report by the College Board, a nonprofit organization of colleges, universities and other educational institutions.
The nonprofit College Savings Foundation’s latest survey indicated the number of parents who believe student loans will be necessary to help pay for higher education of their children increased to 47 percent from 37 percent the previous year.
MAKING SMARTER MONEY DECISIONS
The No. 1 reason why students default on student loans is over-borrowing, according to FinAid.org.
Henry said one of the main reasons Powercat Financial Counseling, a free service available for students on the bottom level of the K-State Student Union, was opened this semester was to address the lack of awareness regarding student loans.
Jodi Kaus, program director for Powercat Financial Counseling, said the economy is a huge factor in student-loan defaulting.
“There are students who come in my office every day struggling to find jobs,” Kaus said. “Their parents are struggling and they are finding themselves in a much different situation.”
She said before students take out loans, they need to consider their first post-graduation job take-home pay and compare that to monthly loan payments. If that number is more than half of the expected salary then other options should be considered.
“Students are not going through the entire financial analysis of taking out loans,” Kaus said. “They just check the box and say ‘Yes, I need the money.’”
She said just because a certain amount is offered does not mean students should take the entire amount out.
“I am seeing a huge need for this type of service,” Kaus said. “There are students coming in who can’t afford real need basic life essentials.”
FINDING WELL-PAYING JOBS DURING A RECESSION
“The goal is to keep our students employed and, in turn, help keep those default rates low,” Henry said. “If you go out and don’t get the job you wanted, or it’s not going to pay as much as you thought, it’s going to be especially hard to pay that money back.”
He credited K-State’s Career and Employment Services for preparing students, aiding them in finding good jobs and ultimately helping keep the default rate down.
Kerri Day Keller, CES director, said students need to do a lot of research before choosing a major and career.
“Students need to seek advice and input so they can make an informed decision,” she said.
Day also said students should look into jobs in the nonprofit sector that have loan deferment and waiver programs coming through the federal government.
Henry said although K-State’s default rate has increased from past years, being below the national average shows K-State is still placing graduates. He said graduates went out and found well-paying jobs, and even in the down economy, K-State still placed the majority of students who graduated last year.
“If we continue to turn out valuable students, they will continue to be able to pay off those loans,” Henry said.
I think congress will reach an agreement on health care before I get anywhere with my student loan holder!