W.Va. default rates high on school loans
CHARLESTON, W.Va. - Nearly a quarter of students attending community and technical colleges in West Virginia are not repaying their federal loans, according to new data.
That is well above the state and national default rates for students at public or private four-year colleges or for-profit institutions.
Representatives from West Virginia community and technical colleges said several factors contribute to this high default rate: the nature of the student population, lack of financial aid education, crippling debt from other college experiences and students trying to game the system.
Using a new, more expansive system for tracking default rates, data released Friday by the U.S. Department of Education shows a 24.6 percent rate for community and technical college students in West Virginia.
Students typically drawn to such schools face a wide array of financial problems, said Stephen Benson, vice president for finance and administration at New River Technical College.
Many have full-time jobs, they're not fresh out of high school or they have families.
Many have tried to earn a degree before. They might bring credits from that experience, but Benson said they usually bring debt as well. He pointed to students recently transferring to New River from the troubled Mountain State University.
"We've had students come to us who have attended there . . . they've been attending there for multiple years; they come to us with $30,000 debt and no degree," Benson said.
Janet Fike, vice president of student services and director of financial aid at West Virginia Northern Community College, agreed. She said a student's cumulative debt can become overwhelming.
About 83 percent of students attending Fike's school needed financial aid last year.
The more money going to a school's students, the greater the chance some students will default.
To continue receiving federal aid, students must meet certain grade and course completion standards. If a student receiving aid slips below these marks, aid can be suspended or eventually canceled, said Brian Weingart, senior director of financial aid for the state Higher Education Policy Commission.
Although the measure is aimed at preventing failing students from receiving more federal money, Fike said it also greatly affects a student's chances of eventually paying back debt already accrued.
"If students don't graduate and go out and don't have a job, they're not able to make the payments," Fike said.
Some students are just looking to make a quick buck.
Fike, Benson and others said community and technical colleges must watch out for students who apply to school solely to receive financial aid.
"They may attend one class, get their financial aid refund check and never come back," Benson said.
This might have led to higher default rates at community and technical colleges in the past. Now many schools have tied attendance to financial aid requirements.
West Virginia University at Parkersburg requires students to earn a 2.0 grade point average and complete 75 percent of the courses they register for to receive aid, Anthony Underwood, dean of students services, said in an email. Students must attend class regularly for one month before they receive a check, he added
"We want students to succeed," Katie Wootton, a college spokesperson, wrote in an email. "If they aren't coming to class, they are less likely to complete their certificate or degree program, which makes it more difficult for them to pay back their student loans."
More is being done to educate students about the risks of borrowing and to help cut down the amount borrowed. That means limiting available financial aid, but also reducing the budget used to "calculate the cost of attendance," Benson said.
"We've lowered those limits for what we will award to students, just to be very responsible to the students and not graduate them with high financial aid debt," Benson said.
The new guidelines move to a three-year window in measuring the number of students who default, compared to the previous two-year model. As such, the current rates reflect students who started repaying loans between October 2008 and September 2009 and had defaulted by September 2011, according to the department.
Improvements from new programs should show in future data, administrators said.
Nationally, students attending for-profit colleges default at a higher rate than other students.
Default rates at these institutions in West Virginia are also high: among all institutions with at least 100 students repaying loans, Everest Institute in Cross Lanes has the highest default rate. More than 500 of its 1,715 students scheduled to begin loan payments during the monitored time period had defaulted. That was nearly 30 percent.
The college is run by parent company Corinthian Colleges Inc. The company has 116 sites nationwide serving 91,000 students, and many have experienced equally high default rates, spokesman Kent Jenkins Jr. said.
Jenkins said the recession played a role, and students at his company's institutions tend to come from low-income backgrounds. However, he admitted Corinthian Colleges also have made some mistakes.
"We tried to change the way we worked with our students," Jenkins said of the college's financial aid structure. "We thought the system we were changing to would make things better. Unfortunately, it had the exact opposite effect."
But since 2009 the company has invested "tens of millions of dollars" to correct the issue, he said. That included hiring financial counselors for every campus and purchasing information technology that allows the college to stay in touch with its students.
He said those changes have helped drop the system's two-year default rate from 21 percent to 6.7 percent system-wide.
"We dropped our two-year ... rate by two-thirds in one year." Jenkins said.
One of the main reasons the U.S. Department of Education moved to a three-year monitoring system was to get a "more accurate picture of how many borrowers ultimately default on their federal student loans," according to a statement. A large drop in such a short period of time like the one seen at Corinthian Colleges makes Weingart of the Higher Education Policy Commission nervous.
He said there have been national concerns that some for-profit and other institutions are trying to get too many students to consider pushing back loan payments. Although deferment might give students more time to pay off debt, it also can push back an unavoidable default to outside the education department's monitoring window.
Jenkins said Corinthian Colleges' financial counselors have encouraged eligible students to apply for loan deferrals. He said the number of students moving into deferrals was "clearly a very, very significant part of the short-term drop" seen in the college's default rate. He also acknowledged a school's eligibility for federal financial aid is directly related to the rate at which its students default.
The college is not trying to sidestep rules, Jenkins said. Instead, it's trying to get the default rate low and maintain that rate with the new financial aid systems.
"What we're not doing here is not just trying to kick the can down the road (so that we are) outside of the two-year or three-year window," Jenkins said.
"We've acknowledged our issue. We actually started working on this very hard two years ago ... and we've gotten results," he continued, adding the results will be reflected in future data.
Nationally and in West Virginia, students attending public and private four-year institutions defaulted at the lowest rates.
About 7.7 percent nationally defaulted under the new federal guidelines. In West Virginia about 11 percent defaulted.
West Virginia University has more students repaying loans than any other institution in the state. Its students defaulted at a 7.6 percent rate. Marshall University, with the second largest number of students repaying loans, had a default rate of 9.9 percent.
Attorney General Darrell McGraw's office will announce a website today that will help educate students and parents about loans.
More information is available at www.studentaid.ed.gov.