As the student default rate continues to climb nationwide, fewer University of Minnesota students are having trouble paying back their loans.
The percentage of college students in loan default is the highest itâÄôs been in 12 years.
More than 7 percent of students at public universities defaulted on their loans in 2009, according to a report released on the student loan cohort default rate Monday from the U.S. Department of Education.
In contrast, just 1.7 percent of University students defaulted on their loans in 2009 âÄî less than half of a percentage point increase from 2008 âÄî with 146 students in default.
The University has historically had a low number, said Kris Wright, director of the Office of Student Finance.
She speculated that the UniversityâÄôs measures to inform students about student loans helped keep its default rate low.
âÄúWeâÄôre very sincere about financial literacy and making sure our students donâÄôt borrow more than they have to,âÄù Wright said.
She said all graduating students are required to go through exit counseling to help them understand their options on their student loans, like forbearance, the grace period and income-based repayment, which allow students to pay back loans with a monthly cap based on income.
Other practices include presentations like âÄúLive Like a Student,âÄù which all freshmen attend during Welcome Week.
While the nationwide increase is âÄúquite troubling,âÄù the low default rate signifies that the University is a good investment, said Debbie Cochrane, program director at the Institute for College Access & Success, an independent research organization concerned with college affordability.
âÄúWhen you see a large public university with a low cohort default rate, I think the immediate assumption is that theyâÄôre providing a quality education at a good price,âÄù Cochrane said.
All of the public Big Ten schools are well below the national average. Penn State University has the highest rate, at 4.2 percent.
The University of Wisconsin and University of Michigan tie for the lowest rates at slightly below 1 percent.
The percentage of students in loan default has increased since 2008 because borrowers are struggling in the economy, said James Kvaal, the U.S. deputy undersecretary of education.
But he said the federal government has tried to help low-income students afford college by increasing the Pell Grant maximum to $5,550 per year.
âÄúWe continue to believe that college can be one of the best investments of a lifetime,âÄù Kvaal said.
The default rate for all sectors of higher education in 2009 was almost 9 percent âÄî an increase of almost 2 percent since 2008. The default rate is at its highest since 1997, Kvaal said.
The growth of for-profit colleges has contributed greatly to the increased rate âÄî Kvaal said the default rate at such colleges is much higher than any other type of school. The average default rate of students at for-profit institutions went up to 15 percent.
More than 320,000 borrowers counted in the 2009 data defaulted on loans before Sept. 30, 2010. In order to be considered in default, loans had to be at least 270 days past due and within two years of entering repayment. Cohort data only captures a two-year snapshot after graduation.
Kvaal said the money owed on student loans will eventually be recouped through other means like wage garnishment. Students can also lose eligibility for future student aid if they default on their loans.
âÄúFor students, the consequences of not managing their student loan debt can be quite severe,âÄù Kvaal said.
