'U' loan default rate low

It's official. The numbers are tallied. Michigan is No. 5 in the Big Ten.

In an annual report released yesterday, the U.S. Department of Education reported that the University's student loan default rate for fiscal year 1995 was 4 percent - significantly lower than the national average of 10.4 percent but close to the Big Ten universities' average 4.1 percent default rate.

"Generally, our students do a good job at paying back loans," said Director of Financial Aid Pam Fowler.

While the default rate for the University increased slightly from the 1994 rate of 3.8 percent, Fowler said the increase is not significant.

LOUIS BROWN/Daily Sondra Fonville (left), a financial aid counselor, looks over financial forms with graduate student Moneka Stradford at the financial aid office.

"The increase is so small, it isn't something we would study," Fowler said, adding that it may be even smaller than the department's figure. Fowler said there were some errors made in the Department of Education's calculation, and the true default rate for the University is 3.9 percent.

"They had reported some students in default who weren't," Fowler said.

According to the Office of Financial Aid, 32 percent of University students receive federal loans.

Vice President for Government Relations Tom Butts, who is involved with the University's federal Direct Loan Program, said he agrees the drop was not significant.

"I wouldn't regard such a small change as statistically significant," Butts said.

The University's rate of students who did not pay back their federal loans was the second lowest of the state's 12 public universities, behind Michigan Technical University's 2.9 percent default rate.

Tom Scarlett, director of financial aid for Michigan State University, which had a 5 percent default rate, said the ability to pay back loans is proportional to the ability to get a job after graduation.

"The graduates of the University of Michigan go out with higher paying jobs than our students," Scarlett said.

Fowler also contended that the University's high academic standards prepare students for a competitive job market.

"Good graduation rates and the academic reputation of the University translate into the job market," Fowler said.

The University's departments of financial aid and student loan records and collections provide exit loan counseling for students who are about to graduate. That counseling helps the students prepare to pay back their student loans.

The average default rate for Big Ten schools is significantly lower, at 4.1 percent, than the overall 10.4 average default rate.

Although the student loan default rate increased slightly at the University, the overall national average decreased .3 percent from 1994. The highest default rate, in 1990, was at 22.4 percent.

"We must acknowledge greater vigilance and more aggressive collections efforts involving each of the participants in the federal student loan programs - including students, schools, guarantee agencies and the Department of Education," Secretary of Education Richard Riley said at a press conference yesterday. "Further, the strength of the economy and the resulting low employment rate helped borrowers enter into repayment and stick with it."

Butts said there are many factors that contribute to the University's high academic standing and student loan default rates are relatively insignificant.

"The University of Michigan is well regarded on a whole host of fronts," Butts said. "I don't think our loan default rate makes a big difference."

11-13-97