GRAND RAPIDS — The federal government’s moves to make it easier to obtain a student loan and pay it off within everyone’s specific financial means has paid off, so to speak.
The nation’s student loan default rate has dropped to an all-time low of 5.4 percent and, for the first time ever, all schools have rates low enough to ensure they remain eligible for federal financial aid programs.
Locally many colleges and universities also are maintaining a low default rate, including Calvin College, which reported that in fiscal year 2001 just 1.2 percent of Calvin graduates making loan repayments were in default. For 2000 Calvin’s figure was slightly lower at 1.1 percent, while in 1999 it was 1.4 percent.
“We have always had a long history of having a low default rate,” said Ed Kerestly, director of scholarships and financial aid at Calvin. “The type of students that graduate from Calvin are usually those that have a focused idea of what they want to do, and they’ve finished school and got a job. They complete their education, find employment and then can pay back their loans.”
And Calvin isn’t the only school keeping its numbers down. Hope College reported that in fiscal year 2001 default rates were 1.8 percent, in 2000 they were the same, and in 1999 they were slightly higher at 1.9 percent.
Cornerstone University reported its 2001 default rate to be 2.1 percent. It was the same in 2000 and slightly higher, at 2.9 percent, in 1999. Similarly, Grand Valley State University reported for 2001 only 2.9 percent of its students defaulted, while that figure was 3.1 percent in 2000 and 3.2 percent in 1999.
Aquinas College was up a bit in 2001 when its numbers read 4.7 percent; however, in 2000 the default rate was 1.4 percent and in 1999 it was 3.3 percent. Michigan State University, which has an extension program in Grand Rapids, reported a 2.7 percent default rate in 2001, 3.4 percent in 2000 and 3.9 percent in 1999.
Western Michigan University had default rates of 3.4 percent in 2001 and 2000 and 4.1 percent in 1999. Ferris State University was higher with 7.4 percent in 2001, 7.8 percent in 2000 and 7.4 percent in 1999.
In 2001, 5.7 million students obtained $39.7 billion in federally backed loans.
The national student loan default rate reached a high of 22.4 percent in fiscal year 1990 but has declined steadily since then. U.S. Department of Education officials attribute the drop in defaults to improved credit counseling, more flexible repayment schedules and low interest rates.
Secretary of Education Ro Paige said current interest rates on federal Stafford Loans are now at an all-time low of 3.42 percent. As recently as three years ago it was more than double that at 8.19 percent. The current interest rate on Parent Loans for Undergraduate Students (PLUS) has dropped to 4.22 percent, also the lowest rate ever.
Another factor Kerestly sees in the low default numbers is the offering of default management programs for students at Calvin. He told the Business Journal that the school talks with students about issues related to borrowing and works closely with them throughout the process of borrowing and repayment.
“We want to help students and make sure they make their payments or at least help them when they are in a period where they can request a period of forbearance,” said Kerestly. “Many schools have programs similar to this and, in the end, coupled with lower interest rates, consolidation plans and borrowers counseling — as well as the responsibility of the student — we can work to perpetuate these low default rates.”