Drop noted in Arkansas student-loan defaults

The rate of Arkansas student-loan defaults fell but remained above the national rate, according to federal data released this week.

Out of 42,389 Arkansas students who began loan repayments in fiscal 2015, a total of 4,754, or 11.2 percent, were in default within three years, based on numbers from the U.S. Department of Education. The national default rate for the same time period was 10.8 percent, with 531,653 borrowers considered in default out of the 4,900,932 who began paying back loans in 2015.

The period tracked by the Education Department was from Oct. 1, 2014, to Sept. 30, 2017, with the 2015 group made up of those borrowers who began to make loan repayments from Oct. 1, 2014, through Sept. 30, 2015.

"What we've been seeing is that the Arkansas rate is declining faster than the national rate. Our goal is to see the Arkansas rate drop below the national rate, and so we're getting very close," said Tony Williams, director of the Arkansas Student Loan Authority, a state agency.

Default generally means more than 360 days has passed without a regularly scheduled payment being made on an Education Department loan, according to the department's explanation of how the rates are calculated.

The Arkansas default rate fell a full percentage point from a year earlier, when 5,187 borrowers, or 12.2 percent, were considered in default out of 42,360 borrowers who began repayment in fiscal 2014. Nationally, the drop was 0.7 percentage point from the 2014 rate of 11.5 percent, when 580,671 out of 5,047,954 borrowers were considered in default.

The numbers reflect repayment by students who attended Arkansas postsecondary schools, regardless of where they may be living now, said Williams.

By school, Arkansas Baptist College had the highest student-loan default rate at 33.2 percent for its 2015 group, with 174 borrowers in default out of 523 who began repayment. The rate increased from 22.9 percent for the school's 2014 group, which had 93 borrowers in default out of 406 who began repayment in 2014.

Regina Favors, whom college officials announced in September as interim president of Arkansas Baptist College, said in a statement that while the school's current leadership "is concerned" about the spike in the default rate, "we are more concerned about ensuring that our students have the tools and resources needed to be financially secure and productive citizens."

She described the Arkansas Baptist as a historically black college that "provides academic opportunities to at-risk students that are from low-income families." Federal data from the National Center for Education Statistics shows 293 Pell grant recipients out of 360 bachelor's degree-seeking students in 2016-17. Pell grants are federal grant that go to students with exceptional financial need.

Favors noted that the college now requires a one-hour course on financial literacy and has "dedicated additional resources" to efforts including student retention and career readiness, noting research that shows many student-loan defaulters drop out before earning degrees.

"In addition, Arkansas Baptist College has also partnered with a third-party vendor to assist with its outreach efforts to ensure that former students know that the U.S. Department of Education provides opportunities to defer student-loan payments and even in some instances reduce the monthly payments," Favors said.

The statewide default rate is calculated for students in various types of schools, including public and private universities as well as proprietary schools -- like beauty and barber schools -- and community colleges.

The state's largest university by enrollment, the University of Arkansas, Fayetteville, had a default rate of 5.4 percent, with 235 students considered in default within three years out of 4,279 who began repayment in fiscal 2015. The rate was a decrease from the 6.8 percent default rate for the fiscal 2014 group, which had 261 students in default out of 3,837 who had begun repayment.

Williams said 14 colleges and universities pay the Student Loan Authority to track student borrowers and provide them financial counseling. Income-based repayment plans allow students to make reduced payments on student loans, he said.

But students can be intimidated by large loan balances and avoid taking action, he said. Consequences of defaulting on a loan include a negative credit history that can affect the ability to get a house or car loan, and students in default can face a court order that requires that a portion of their paychecks goes instead to the Department of Education.

The default rate, as published by the Education Department, "is only a part of the story," said Debbie Cochrane, executive vice president of the Institute for College Access & Success, in a statement published online by the nonprofit.

The published rate "captures students who default within three years of leaving school, but many more of these students are likely to default in the coming years, especially students who are low-income, African American, or attended for-profit colleges," Cochrane said.

A Section on 09/29/2018

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