I recently spoke with Jane Shaw of the Pope Center for Higher Education Policy about the student loan default problem and whether or not universities should assume some responsibility for it. Here’s part of our Carolina Journal Radio conversation.
Martinez: Do universities have any risk at all? Is there any skin in the game when a student defaults on their loans?
Shaw: There isn’t any. There is a slight reprimand if a school has 30 percent of its graduates within a two-year or three-year period default. Then they get into a little bit of trouble with the [U.S.] Department of Education. And maybe once a year, there are a couple of schools that are dropped from the federal program. But by and large — no. For the 4,000 or so schools that we have in the country, there is no skin in the game.
Martinez: I mentioned 375,000 students defaulting in 2010. Is that a lot? What percentage are we talking about here?
Shaw: Well, that’s about 9 percent, and that means that within two years of their graduating or leaving school, they’re allowed a six-month kind of hiatus, I guess, and then they have to start paying. And so by two years after they graduate, 9 percent have not — nationally — have not been able to pay. And yet, a definition of default is, I think, six months of nonpayment. So that means you have to be in a pretty bad situation to get that. The Department of Education is now expanding that to three years, so within three years of graduation, the figure is higher. It’s more like 13 percent.
Martinez: What about in North Carolina?
Shaw: It’s very hard to get default rates actually, because some schools apparently don’t reveal them, but in the University of North Carolina system currently, the figure is about 6 percent.
