The rate at which students default on their federal loans increased almost 2 percent among Ohio University students and nationally, according to data released late last month by the U.S. Department of Education.
More than 5,800 OU students were in the process of paying back federal loans in 2008 and 2009. Although 2009’s numbers are preliminary, 336, or 5.7 percent of students, defaulted on their loans, according to OU’s Office of Financial Aid.
In 2008, only 233, or 3.9 percent of students, defaulted.
“It’s a mess. If you can stay out of default, you definitely want to,” said Sondra Williams, director of Student Financial Aid. “This is just another thing you have to pay for.”
OU will finalize the numbers for 2009 this September. During each of the past three years, OU’s preliminary numbers decreased by .3 percent by fall, she said.
The numbers are calculated two years after a class’s graduation, but the government will switch to a three-year waiting period in 2014, Williams said.
On a national scope, the number of students who defaulted increased from 7 percent in 2008 to 8.9 percent in 2009, according to the U.S. Department of Education.
“I think until the economy gets better, we’ll see a rise for another year or so,” Williams said.
This has been a trend during the past few years, she added. Since 2006, the default rate at OU has increased from 3.3 percent while the national rate increased from 6.7 percent.
When students default on their federal loans, OU sends them letters warning them about the consequences of not paying. Students who fail to repay their loans can have their wages garnished, credit damaged and tax returns seized by the government.
If students fall behind on their payments, however, the government might work with a debtor to halt or limit their payments on a temporary basis, Williams said.
For students to be eligible for federal loans, they must go through an online course at the start of school and upon graduation.
“We used to hold counseling sessions when I started. … Now, it’s all done online,” Williams said.
Despite the course, the different payment options can be confusing, said Kyra Dawson, a 2011 alumna of OU’s Heritage College of Osteopathic Medicine.
“I sat through two programs and the exit interview, and I still have no idea what I’m going to do,” Dawson said. “I think that is the general consensus.”
The government has five different payment plans, all of which begin six months after graduation.
Upon graduation, the average OU student faces $19,558 of federal debt and $25,330 in total debt, including private loans, Williams said. About 68 percent of OU students take out some sort of loan during their time in college.
Default rates have increased among students who attended both private and public universities since 2007. The national default rate increased from 5.9 percent to 7.3 percent for public universities and from 3.7 in 2007 to 4.7 percent for private universities in 2009, according to the U.S. Department of Education.
Most state schools in Ohio are slightly below the national average, except Central State University in Wilberforce, which has about a 25 percent default rate, Williams said.
“I think (OU students’ situation) could probably be worse … as long as we’re in the same ballpark as other schools,” she said.
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