Nearly 4,000 Rhode Island Students have Defaulted on Loans Since 2009
Wednesday, October 03, 2012
Roughly one of every ten students from Rhode Island colleges who began paying back their federal loans in fiscal years 2009 or 2010 has defaulted, according to data released last week by the U.S. Department of Education.
In total, 3,689 students who entered repayment during those two years have fallen behind, with four schools posting default rates over ten percent between those years.
The worst rate came from the Lincoln Technical Institute, which saw 25 percent of its students default on their loans between fiscal years 2009 and 2010. In fact, the three-year default rate for 2009 (30.3 percent) is so high that the Department of Education is requiring the school to form a “default prevention task force” to identify why the numbers are so high.
Still, Rhode Island’s default rates are below national average, which saw about 13.4 percent of students who entered repayment in fiscal year 2009 fell behind on their loans.
“I'm glad Rhode Island’s default rate is lower than the national rate, though it's still distressing,” said Simon Moore, the executive director of College Visions, an organization which advises inner city students on the college application process. “There continue to be tremendous financial benefits to earning a college degree. Yet we're at a point where the cost of earning a degree can negate these benefits.”
Look Beyond Bottom Line
Moore said it is becoming increasingly important for families to make smart, well-informed decisions about financing higher education. He said families need advice on how to minimize borrowing as well as more information about graduation rates and default rates while student needs to learn how manage loan debt and understand that there are alternate repayment options before defaulting.
“At a certain point, it doesn't make sense to go into debt for a college that is not uniquely suited to your major (Pharmacy, Engineering, etc.) or highly competitive (the Ivy League, Duke, Georgetown, Williams, Bowdoin. etc.).” Quinn wrote in an e-mail to GoLocalProv. “It's one thing to take out $25,000 in loans, but it's another to get saddled with $100,000-$200,000 of debt. At that point, you should seriously consider if the primary campus of your state university isn't a better value."
Of Rhode Island’s three state schools, the Community College of Rhode Island (CCRI) had by far the largest default rate (11.9 percent) between fiscal years 2009 and 2010. Rhode Island College (RIC) and the University of Rhode Island (URI kept their default rates for the two years below seven percent.
For the 2012/13 school year, CCRI charges full-time student $1,812 (plus fees) per semester, RIC costs $7,598 for Rhode Island residents (excluding room and board) for the year and URI costs 14,126 (excluding room and board) for the year.
The Rhode Island School of Design, Brown University, Bryant University and Providence College have all kept their default rates at or below three percent for those two years.
“While [the default rate] is lower than some of the other institutions in the state, I’m not exactly pleased with it,” said James T. Hanbury, the director of Student Financial Aid at Rhode Island College. “I think the 2009 rates are a reflection of the very difficult economy that Rhode Island has had for the past few years. One of the things in our favor is that RIC has tried to keep tuition and fee rates as low as possible. For example, high need students who live with their parents and commute from home can receive federal and state grants to cover most of their tuition and fees.”
“Bottom Line, Don’t Default”
Still, for many students, hindsight is twenty-twenty. But once they find themselves falling behind students, financial planners say it’s important to work with lenders rather than throw in the towel on paying. Giving up will likely come back to haunt you or in some cases, your family.
“Bottom line, don't default,” said Laura Gustafson, of Forbes Financial Planning. “If you're in a tough financial situation where you are considering bankruptcy, negotiate with the student loan lender to restructure your monthly payment. Chances are that the loan will not go away so you want to remain in good standing.”
Gustafson said the trouble with student loan debt is that loans typically are not dischargeable when someone goes through a bankruptcy. She said falling behind on students loans can result wage garnishment, the withholding of federal and state tax returns and a lower credit score. In other cases, parents or family members who co-sign for loans have been known to be targeted by collectors.
“Those parents, and sometimes grandparents, need to make sure that the student repaying the loan is in good standing,” Gustafson said. “If not, those co-signers are just as affected by a default. There have been instances where grandparents, living in retirement, had their Social Security garnished due to the default of a student loan they co-signed.”
More Aid Needed
But while it is important to discuss building awareness about the pitfalls of unmanageable student debt, the broader question of college affordability is something Moore said needs to be addressed.
Moore said young people have tremendous incentive to pursue higher education and the Obama administration has made it a priority to increase the number of degree holders in the country, but he noted that the country still has to find a way to fund that goal.
“College sticker prices are rising rapidly while federal financial aid has only increased marginally,” Moore said. “This is compounded by the fact the weak economy has hurt college endowments, meaning there's less institutional grant money available.”