Ranking the Highest Student Loan Default Rates in Central MA

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Monday, November 04, 2013

Kate Nagle, GoLocal Contributor

The U.S. Department of Education recently released its annual student loan default data, and while the latest three-year default rate average for Massachusetts students at 8.5% is well below the national average of 14.7%, 7,531 Massachusetts students defaulted on their loans from the FY 2010 cohort.

See Which Schools In Worcester Had the Highest Number of Students Defaulting BELOW

Overall, the national two-year cohort default rate rose from 9.1 percent for FY 2010 to 10 percent for FY 2011. The three-year cohort default rate rose from 13.4 percent for FY 2009 to 14.7 percent for FY 2010.

The Department of Education is replacing its calculations from two-year to three-year cohorts as required by the Higher Education Opportunity Act of 2008. Congress included this provision in the law because more borrowers default after the two-year monitoring period, so the three-year cohort better reflects the percentage of borrowers who ultimately default on their federal student loans.

“The growing number of students who have defaulted on their federal student loans is troubling,” U.S. Secretary of Education Arne Duncan said. “The Department will continue to work with institutions and borrowers to ensure that student debt is affordable. We remain committed to building a shared partnership with states, local governments, institutions, and students—as well as the business, labor, and philanthropic leaders—to improve college affordability for millions of students and families.”

Addressing College Affordability -- and Loan Defaults

Martha Savery, Director of Public Affairs at the Massachusetts Educational Financing Authority (MEFA) recently addressed college affordability with GoLocal -- and pointed to the annual survey that MEFA and Fidelity on college savings in Massachusetts and nationwide as containing critical information for students and parents considering educational options.

"This survey focuses on the importance of conversations families need to have about the cost of college and saving for college," said Savery.

Key findings of the MEFA-Fidelity survey included the following:

• 74% of families believe the cost of college is becoming cost prohibitive
• 55% are concerned their children will have to make compromises in the quality of their education due to cost 
• 51% believe that saving too much will hurt their child’s eligibility for financial aid 
• 43% do not believe they will be able to secure a student loan for the full amount  they need to pay for their child’s education 

See Full Survey Results Here

John Longo, a legal contributor with GoLocal, earlier this year addressed "why you need to pay your student loans first."

"Filing bankruptcy usually wipes out credit card debt but it almost never wipes out student loans. (So it seldom makes sense to pay credit card bills instead of student loans.)," wrote Long.  "When federal student loans go into default, the lenders can do nasty things other creditors cannot. For example, they can often intercept tax refunds and garnish Social Security benefits."

He continued, "Banks, credit cards and other creditors have to sue you before they can garnish your wages or seize your bank accounts. You will know you are being sued and have a chance to defend yourself or work out a payment plan. But student loan lenders often do not have to bother suing before they grab your money.  Once a loan goes into default, you get hit with a bunch of fees and penalties. You can get out of default by making payment arrangements but some of the fees and penalties never go away."

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Related Slideshow: SLIDES: Ranking the Highest Student Loan Default Rates in Central MA

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