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March 11, 2013

Schools aim to reduce debt burden

Photo | Steve Laschever Braden Hosch, director of policy and research at the Connecticut Board of Regents for Higher Education, said he is concerned about the higher student loan default rates experineced by students at vocational schools in Connecticut.
By Greg Bordonaro

While vocational school students in Connecticut have the highest average default rates on federal student loans, some of the state's community college students aren't faring much better.

The 12 public community colleges that participate in the federal student loan program had an average three-year student loan default rate of 11.5 percent, the Hartford Business Journal's computer analysis of federal education data has found.

That is above the statewide average default rate of 9.8 percent.

Schools with the highest three-year default rates include Middlesex Community College, Tunxis Community College, and Housatonic Community College, which had default rates of 18 percent, 16.7 percent, 14.7 percent respectively, federal data shows.

Quinebaug Valley Community College had a default of 20 percent, but only 10 of its more than 2,000 students took out federal loans.

The three-year default rate tracks borrowers who entered loan repayment between October 2008 and September 2009 and defaulted on their debt by the end of September 2011.

Community college officials say the elevated rates are a concern, but they note that only a small percentage of their students are borrowing money to pay for school.

In fact, of the 58,000 students enrolled in Connecticut community colleges, only 1,601 had federal loans that entered repayment between October 2008 and September 2009.

Braden Hosch, the director of policy and research at the Connecticut Board of Regents for Higher Education, said the small number of community college borrowers is actually more surprising to him than the elevated default rates.

He said few students are borrowing at community colleges because their tuition is less than their four-year college and university counterparts.

In-state tuition at a community college, not including room and board, is typically under $4,000, Hosch said, compared to the $10,000-plus tuition at many other colleges and universities in the state.

At the same time, since community colleges historically have had a low number of borrowers, schools have been averse to steering students to borrow because a small number of defaults can adversely affect the schools default rate, jeopardizing their ability to participate in federal loan programs, Hosch said.

Yet, one in 10 community college students who took out federal loans fell behind on their payments, raising some concerns among higher education experts.

Schools officials say their students share many of the challenges faced by those who attend vocational schools, who tend to come from lower income socioeconomic backgrounds.

"Our students do have more life challenges than what is typical for a student at a four-year college," said Adrienne Maslin, the dean of students at Middlesex Community College. "Sometimes we do make a mistake a give a loan to a student who can't pay it back."

Maslin said even with lower cost tuition, some community college students still struggle to pay back loans. Many community college students are adults with families who have more financial obligations than the typical full-time college student who attends a four-year university, she said.

Community colleges are part of the state's public higher education system and offer mainly two-year associate's degrees in a variety of fields including allied health, criminal justice, business, and liberal arts, among many others.

Four other community colleges had default rates above 10 percent including Housatonic (14.7 percent), Norwalk (14.5 percent), Gateway (12 percent) and Three Rivers (12 percent).

Connecticut's five public four-year universities had a total three-year default rate of 5.5 percent. The University of Connecticut had the lowest default rate of 3 percent, with 127 of their 4,172 federal student borrowers falling behind loan payments.

Western Connecticut State University in Danbury had the highest default rate among the public four-year universities of 9.4 percent, with 115 out of 1,216 borrowers not paying back their loans.

Interestingly, some community colleges have chosen not to participate much in federal student loan programs because they don't think it would benefit their low income students.

One example is Quinebaug Valley Community College in Danielson and Willimantic. The school, which has about 2,100 students including 65 percent who qualify for financial aid, only had 10 borrowers enter federal loan repayment between October 2008 and September 2009. Two of those students ended up defaulting.

Quinebaug spokeswoman Susan Breault said the school has stopped processing Federal Stafford loans and largely issues grants instead. The school provides students about $2 million in Federal Pell grants and $400,000 in state grants, Breault said.

"It's a lower income area of our state and we feel it doesn't make sense for students to take on debt," Breault said.

David Welsh, the director of financial aid at Tunxis Community College, said only about 5 percent of the 4,364 students who attend the Farmington school have federal student loans. Most of the 2,433 Tunxis students who receive financial aid get grants instead.

Welsh said he believes the sour economy is largely driving the school's 16.7 percent default rate. Still, the school's three member financial aid office is working to lower the rate by more closely linking student performance and academic progress to the amount of debt a student can take on.

"Given the employment situation out there I wouldn't be suspired if the default rate was higher," Welsh said.

As schools wrestle with how to lower default rates among their students, some are taking a proactive approach.

In 2009, for example, Middlesex Community College hired a new financial aid director who revamped the schools advising system to ensure students were better informed about student loan options and repayment plans. Maslin said the school instituted front-end and back-end counseling and greater oversight by school administrators.

Once a loan is awarded to a Middlesex student, the school tracks the student's progress before the money is actually disbursed to ensure he or she is attending class, Maslin said.

"We feel that it helps and allows student to understand we are serious," Maslin said. Maslin also noted that only a small percentage — around 6 percent — of their approximately 3,000 students actually take out federal student loans to pay for their education.

Another issue, experts say, is that when students do fall behind on loan payments they don't know what to do.

Cromwell lawyer Joshua Cohen, who works with student-loan defaulters, says there are increasingly more avenues for students to choose from to help ease their debt burden, but many troubled borrowers aren't aware of their options.

Cohen said he has seen firsthand the increasing problem of student loan defaults. His practice only focuses on student loan law and they survive pretty well doing that, he said.

"I don't think servicers, lenders, or the Department of Education are doing a good enough job about educating borrowers about how to afford student loan payments," Cohen said.

Federal student loans can't be easily discharged even if someone files for bankruptcy so the debt can follow someone for life, Cohen said. So it's important for people to seek out options if they are having problems paying back their loans. Some options include income based repayment plans, which ensures that monthly loan payments don't exceed 10 to 15 percent of an individual's discretionary income, Cohen said.

Extending a loan repayment timetable and loan forbearance or deferment are also options, Cohen said.

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Unpaid student loans hit CT vocational school pupils hardest

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