Rate of students defaulting on loans rises

Mariella Roque/ Staff Writer

Student debt could be the next financial bubble to burst nationally, according to University President Mark Rosenberg.

In a recent Board of Trustees meeting on Sept. 5, the Finance and Audit Committee at the University presented information detailing the state of undergraduate student debt and initiatives taken to help lower the increasing rates.

“My personal belief is that student debt is not necessarily bad,” Jessell said. “You’re making an investment in higher education and that investment will always have good dividends.”

During the 2011-2012 fiscal year, 48 percent of students at the University graduated with debt averaging $16,026. This compares to 2007-2008 when 29 percent graduated with debt averaging $10,899, a 19-point increase over a 3-year period.

Director of Financial Aid Francisco Valines attributed this increase to the economic downturn in 2008, explaining that parents who were previously bearing the cost of education no longer had the means, forcing students to turn to loans.

“If we look at the numbers, less than half of our students graduate with debt. The other half don’t have any debt at all versus 66 percent nationally,” Valines said. “I think our debt is still pretty manageable for our students.”

What does concern Valines is the 7.5 percent Cohort Default Rate at the University, which is the percentage of students who took up loans and defaulted within the first two years following graduation. The average default rate for the Florida’s State University System is 9.7 percent.

“Obviously, as an institution, we want to do more to increase need-based and merit-based financial aid,” Jessell said. “The need is especially necessary for us.”

If a university’s default rate goes over 25 percent, the institution is subject to losing its eligibility in providing the Direct Loan Program or the Federal Pell Grant Program to its students.

To help reduce the default rate, the University hired a default prevention financial aid coordinator to establish contact with graduates who have defaulted, in hopes of helping them pay off their loans.

“A lot of students go into default because they don’t know what their options are,” Valines said.

If a graduate is unemployed, he or she has the option of seeking unemployment forbearance and having the loan temporarily suspended. Comparatively, if a graduate is employed, but receives a low income, there are income-based loan paying programs where the rate of repayment is reduced.

“We think that if we reach out to you as a former student, you’re more likely to reply to us so we can help you through the process,” Valines said. “We’re taking responsibility to help graduates do that.”

According to Valines, the University has helped about 1,600 students.

The former coordinator, Andres Sanchez, recently left the position to attend medical school and the University is in the process of hiring a new coordinator to continue the effort.

Catherine Flores, a senior majoring in English, felt that Federal Student Aid standards for financial aid are too high.

“I think there is enough financial aid available, but not enough people are qualified for it,” Flores said. “I know plenty of people who aren’t eligible by FAFSA standards that have a hard time paying for school without accumulating debt.”

Financial need is defined by FAFSA or the Free Application for Federal Student Aid as “the difference between the cost of attendance at a school and your expected family contribution.” In other words, if the provider of your family is unable to pay for your education due to a straining financial situation, FAFSA will offer you a form of aid to make up for the difference.

“I don’t qualify for any financial aid so I’m forced to take up debt just because the government thinks my parents are swimming in cash,” said freshman in engineering Lucknell Madestin. “For making enough money to be above the poverty level, I’m not considered eligible.”

In 2011-12, a total of $400.2 million in need and merit-based financial aid was distributed to 37,372 students at the University, according the Finance and Audit Committee.

With the presidential elections nearing, standards and rates for student loan programs may be subject to change. President Obama’s current view is using government tax revenues to subsidize the cost of college by means of increasing financial aid and its availability.

The view of his opponent, former Governor Mitt Romney, is that rather than the government increasing Pell grant awards and aiding students in paying off loans, it is more important to work toward strengthening the economy so that students can count on well-paying jobs to pay off the loans.

“We know how great the value of a college degree is,” Valines said. “We want students to be smart about what they borrow.”