The Towerlight’$ Financial Guide: Students look to avoid debt
Towson hasn’t escaped the national trend of an increasing number of students taking out loans but the University does have an impressively low default rate.
“TU’s current three year Federal Student Loan default rate (three percent) is well below the national average,” Director of the Financial Aid Department David Horne said.
For-profit institutions had three-year default rates at 22.7 percent, the highest average, with public institutions, like Towson, at 11 percent and private non-profit institutions at 7.5 percent, according to the statistics released September by the U.S. Department of Education.
A default rate is the rate at which borrowers are missing payment on their loans.
The percentage of borrowers who are defaulting are on the rise, nationally, according to the Department of Education. Within the first three years, the percentage of federal education loan borrowers defaulted at an increased 13.4 percent last year.
Some schools have to worry about Department of Education sanctions that enforce the loss of eligibility for federal student aid programs, unless they successfully appeal, according to the Department of Education website. Schools with default rates of 30 percent or more over a three- year cohort default rate will face that risk.
The number of those in default rose to about 5.9 million, who collectively owe about $76 billion on loans, according to a New York Times article published in September. And federal student loans also increased by about a third over the last five years, as the article stated.
“Most cases of excessive borrowing involve students who didn’t just borrow federal student loans,” Horne said. “Most students with excessive debt also borrowed excessive additional loans from private loan programs or the Federal Parent (PLUS) Loan program. As long as students’ loan requests don’t exceed the federal maximums, schools have extremely limited authority to prohibit students from borrowing excessive amounts.”
Towson University data sets also show that there was an increase in the number of student loans from all sources (excluding parent loans) from $20,355,543 for the 2008-2009 school year to $30,690,249 for the 2011-2012 school year. There was no data available about the federal loan impact on these numbers.
“I do know a lot of the students build up a lot of debt in getting an education,” Finance Department Lecturer Ted Rugemer said. “And the job market is really not that great right now. You see in the headlines the average student owes $26,000.”
TYPES OF LOANS:
Federal: Loans that are funded by the federal government.
-Subsidized: These are based on need and you are not required to start paying interest until after you are out of school.
-Unsubsidized: These do not require financial need. You have to pay the interest on the loan even while in school, otherwise the interest will raise once you do begin to pay on it.
Private: Non-federal loans made by a lender such as a bank, credit union, state agency, or school.