National statistics show the number of students — including those graduating and those withdrawing early without earning a degree or other credentials — who default on such loans is declining.
The U.S. Department of Education reports post-secondary schools’ default rates based on three-year cohorts. The most recent statistics, publicly released in September, looked at loan borrowers who left college in 2011 and had been repaying for the past three years.
The national rate of default for those students was 13.7 percent, which, according to the Department of Education, was also a decline from the prior year’s average of 14.7 percent. With 169 post-secondary institutions statewide, Massachusetts reported an overall default rate of 8.1 percent.
U.S. Sen. Elizabeth Warren, D-Mass., said the news is encouraging, “But make no mistake: There’s still a lot of work to be done.”
“One in seven student loan borrowers defaulted on their loans within three years of leaving school — that’s 650,000 borrowers who are facing the possibility of fees, penalties, debt collectors, wage garnishment and a lasting impact on their credit,” Warren said. “We should be giving students the tools they need to successfully repay their loans and holding schools more accountable for the role they play in loading students up with debt they cannot repay.”
What is a default?
Student loans usually go into default after a borrower has missed at least nine months of payments, according to loan experts. Prior to defaults, the debts are considered “in delinquency.”
As Warren noted, defaulting on student loans can pose a range of consequences. Borrowers can also be come ineligible for loan repayment options that ironically could have helped prevent a default, including affordable income-based repayment plans. Loan experts say options are fewer when it comes to debts issued by private student loan providers.
The rate of default varies by the type of college
The numbers reported by state and private colleges and universities in Bristol County and nearby show some declines and some increases in defaults.
Data show the changes among the groups of students who left college in 2009, 2010 and 2011. It shows a jump when comparing the default rates of those students who left college in 2009 and those who left in 2010. But a comparison of the 2010 and 2011 groups shows those rates appear to be back on the decline.
Default rates also varied based on the type of institution.
For example, public colleges and universities typically reported higher rates of default than their private counterparts. Community colleges reported higher rates of defaults than four-year public schools. And for-profit, or proprietary, colleges generally reported the highest rates of default among all institutions.
Take, for instance, Rob Roy Academy in Fall River. Although it was one of the smallest schools in the area, it also had the highest student loan default rate, at 24 percent. Twenty-five out of the 104 former students who left the school in 2011 and had loans that defaulted. By contrast, at the Salter School, another for-profit, the default rate was 11.7 percent for that same year.
The University of Massachusetts Dartmouth reported the highest rates of default among the five UMass campuses, with a default rate of 9.7 percent for former students who went into repayment in 2011. Out of 2,151 of those students, 209 of them had defaulted.
By comparison, UMass Boston had the next-highest rate for 2011 at 8.6 percent. UMass Amherst had the lowest rate of default for that year, at 5.6 percent. Another public university, nearby Bridgewater State University, reported a 7.9 percent rate.
Bristol Community College’s default rate for 2011 of 16.6 percent has stayed relatively flat over the three years checked.
That rate places BCC in the middle of the pack among the commonwealth’s community colleges. It’s also four points lower than the national rate for students who left community colleges in 2011, which was 20.6 percent.
Private colleges and universities throughout the region, including Stonehill College in Easton and Roger Williams University in Bristol, Rhode Island, reported significantly lower default rates. Stonehill reported that 0.4 percent of students who left in 2011 — or two out of 484 students — defaulted, while Roger Williams’ reported default rate was 2.9 percent.
In Providence, Johnson & Wales University reported that city’s highest rate of default at 11 percent. Brown University reported its lowest rate, at 1.3 percent, or 11 out of 817 former students.
Higher ed officials say loan defaults are a concern
Local higher education officials interviewed recently generally said they felt having any student default on their debts was a concern.
Many shared efforts at their institutions to keep default rates down, from freezing tuition, educating students about loan repayment and encouraging them to take out fewer loans, and increasing the availability of institutionally offered financial aid that doesn’t need to be repaid.
At UMass Dartmouth — where after receiving financial aid the average student will pay $15,000, including room and board — officials say they’ve taken steps to help curb defaults, in part by boosting institutional financial aid by nearly 50 percent.
Last year, that aid totaled $12.3 million. This academic year, the university is providing more than $18 million. The university has also increased the amount of aid it provides per student, from previously covering 85 percent of each student’s need to now covering 90 percent.
“The approach that we’ve taken is to reduce that indebtedness,” said Ian Day, the university’s interim associate vice chancellor for enrollment.
“We hope that these actions will lessen the need to take out loans,” Day said.
Another step in that effort is retaining students, Day said.
“There has also been and continues to be a major investment in returning students, and moving them along,” Day said, adding that during the past three years, the university’s student retention rate has increased.
Day and campus officials at other schools say their colleges’ debt default rates and student retention rates are directly linked.
Those borrowers who earn degrees are more likely to find gainful employment, and less likely to default. And those borrowers who withdraw early with no degree are typically less able to repay loans. How long it takes for students to earn those degrees is also a factor.
Eileen O’Leary, assistant vice president for finance & director of student financial assistance at Stonehill, said overall she believes graduation rates are “the biggest driver” in student loan defaults.
“If you look at schools with higher default rates, I would suggest you have a six-year graduation rate,” O’Leary said, adding that in addition to retaining students, campus officials at Stonehill also strive to keep students on track to finish their programs within four years.
Department of Education statistics show Stonehill’s four-year graduation rate is 82 percent. 85 percent of students graduate within six years. At Roger Williams, 50 percent of students graduate within four years, and 63 percent within six. At UMass Dartmouth, around 30 percent of students graduate within four years.
Nearby BCC’s tuition costs are lower than at its four-year counterparts, but many students do still need to borrow.
“We work hard to keep that debt minimal,” said financial aid director David Allen, adding there are options for minimizing costs, such as taking dual enrollment courses while in high school and buying books online instead of at the campus bookstore.
The cost of textbooks is largely “the reason why we have to have students borrow,” Allen said, estimating that students probably spend at least $250 per class for books.
When students do borrow for the first time, they are required to undergo counseling sessions to learn their responsibilities in repaying their loans, Allen said. “We’re in contact with any student who finds themselves with any student loans.”
Allen said BCC has the second highest number of students in repayment among Massachusetts’ community colleges, and serves one of the state’s most economically challenged areas.
UMass Dartmouth spokesman John Hoey said in spite of efforts made to help keep debts manageable, there are other factors outside of the university’s control that can contribute to students defaulting, including the local economy, particularly in the SouthCoast.
“I think it’s largely driven by the economy,” Hoey said. “I think this region gets hit harder.”