Federal student loan default rates have reached an "all-timelow," United States Department of Education officials announcedTuesday.
"The rate at which borrowers default on their student loansdropped to 5.4 percent in fiscal year 2002, the lowest rate sincethe first time rates were calculated in 1989," read the 21-pagereport.
Many University of Memphis seniors, worried about how theeffects a staggering post-9/11, post-war economy will have on theirpost-colleges lives, should feel confident with that news, expertssaid.
"I think if you look at all (types) of loans, you'll see thatrates are the lowest they've been in recent memory," said RichardRitzman, University of Memphis director of financial aid.
The lowest rate currently offered by loan consolidationcompanies, Ritzman said, is approximately 3.4 percent, considerablylower than the rate Tony Pals, National Association of IndependentColleges and Universities director of public information, said wasthe lowest available when he graduated college 10 years ago -- 9percent.
Although a low national default rate may appeal to studentsbecause it signals a trend of low interest rates, it is alsowelcome sign to institutions of higher education, like The U of M,Ritzman said.
"Students are repaying their loans, which is good for allparties involved," he said. "If a school has a high federal defaultrate, it stands in danger of losing those funds."
Under the Higher Education Act, lawmakers have set up apunishment for schools with a high number of students who do notrepay loans, Pals said.
"The (Higher Education) Act holds institutions of highereducation accountable for what their students do -- or in this case-- don't do," he said. "That's why many school financial aidadministrators go through extra pains to educate students on thenecessity of repaying loans and repaying them in a timelymanner."
Those extra pains were the second cause listed by the Departmentof Education for the low default rate, after the post-9/11 and -wareconomy.
In the report, the department noted that the institutions thatstrictly require students to attend "face-to-face" exit loaninterviews, like The U of M, had a higher repayment rate amongtheir students than schools that allow the interviews to be donevia Internet.
In addition to those reasons listed by the Department ofEducation, Ritzman said he believes the practice of encouragingstudents to take out the least amount possible is one of the keyreasons students are able to pay back the loans and notdefault.
"I tell students to consider the debt," Ritzman said. "Don'ttake out more than you need and the spend the excess on CDs andpizza. Remember you'll have to repay that money someday."
