VCU students make good on loans

Veronica Garabelli

Contributing Writer

Anam Kamal could have moved out of her parents’ house after she graduated from VCU in May. Instead, she chose to keep living at home so she could pay off her student loans.

“It didn’t make sense in my head, to live on my own and have to pay rent and still have the student loans sitting,” Kamal said. “I didn’t want to carry that burden.”

Just as Kamal is making sure she doesn’t miss her student-loan payments, other VCU students are doing the same. At a time when the national student-loan default rate went up, VCU’s default rate fell – from more than 2.7 percent in 2007 to 2.3 percent in 2008, according to new statistics released this month by the U.S. Department of Education.

According to a Commonwealth Times analysis of the data, VCU’s lowered default rate was one of the biggest drops among the large public schools in Virginia and among VCU’s peer institutions nationwide.

The analysis showed that VCU compared favorably with:

• The 13 other public schools in Virginia that offer master’s and doctoral degrees. Only one school – Virginia Tech – had a bigger decrease in its default rate. At 10 of the schools, the default rate increased. Virginia’s large public schools had a combined default rate of 3 percent in 2008.

• The 25 schools that VCU considers as its peer institutions. Only one of those schools – the University of Chicago at Illinois – had a bigger decrease in its default rate. The default rate rose at 15 of the schools, such as the University of Southern California and the University of Nevada at Reno. The peer schools had a combined default rate of 2.9 percent.

U.S. Education Secretary Arne Duncan said the statistics captured a snapshot in time: About 3.4 million borrowers were due to make their first loan repayments between Oct. 1, 2007 and Sept. 30, 2008; about 240,000 of them defaulted before Sept. 30, 2009.

“This data confirms what we already know: that many students are struggling to pay back their student loans during very difficult economic times,” Duncan said in a press release.

He said the default rates increased from 5.9 percent to 6 percent for public institutions, from 3.7 percent to 4 percent for private institutions and from 11 percent to 11.6 percent for for-profit schools.

Duncan noted that students at proprietary schools are most likely to default. They represented 26 percent of all borrowers and 43 percent of all defaulters. For example, Tidewater Tech, a for-profit school in Norfolk, had a student-loan default rate of more than 30 percent.

“While for-profit schools have profited and prospered thanks to federal dollars, some of their students have not,” Duncan said. “Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use.”

He said the data underscored the need to expand Pell grants and other student loan programs. The Obama administration hopes to do that, Duncan said.

Jane Glickman, a spokesperson for the U.S. Department of Education, said that when schools have lower default rates, it’s probably because students are getting jobs after graduation – so they can pay off their loans. Glickman said these schools probably did a good job counseling students on their loan obligations.

Brenda Burke, VCU’s interim director of financial aid, said the more successful students are in college, the more likely they are to repay their student loans.

“With all else being equal, students who are successful in their studies tend to have lower default rates than students that are not,” Burke stated in an e-mail.

“Student success variables include such things as college major, academic achievement, transferability options, educational goals of the student, financial support and degree completion. Other variables that affect default rates include such things as unemployment, income-to-debt ratios and knowledge of loan repayment options.”

Burke said students should look to student loans as a last resort. They should consider all options of financial aid before borrowing money.

“The Financial Aid office encourages students to only borrow the amount of funds they need to cover their educational costs,” Burke said. “Student loans should not be looked at for funding non-education related expenses.”

Glickman said the Education Department’s website has a lot of information about flexible repayment options. One option, for instance, allows borrowers to make payments based on how much money they make.

Since graduating, Kamal has reduced her student-loan debt from $25,000 to $20,000. She hopes to pay off her student loans by this time next year.

“People don’t realize you end up paying more money if you defer or don’t pay,” Kamal said. “It’s better to scrum up a little bit and pay off that amount.”