Feds go after college-loan defaulters

By Patsy R. Brumfield / NEMS Daily Journal

Mary M. owes $141,065.45 on defaulted student loans.
Two weeks ago, the U.S. Attorney’s Office in Oxford filed a legal complaint for her to pay it back.
The Lafayette County woman is one of seven such cases filed this year to recover thousands of dollars loaned through the U.S. Department of Education to pay for tuition and other college costs.
Similar numbers to recover college loans were filed in 2009 and 2008.
“There is no statute of limitations on these student loan cases,” said Krisi Allen, spokeswoman for the U.S. Attorney’s Office. That means the clock never runs out on the law that requires borrowers to pay them back.
With colleges and universities across Mississippi opening for their fall semesters, officials say these loans are important to their operations.
Total aid for fiscal year 2009-10 at the University of Mississippi, for example, was $158.6 million.
School officials also say the tough economic times are reflected in reasons why their former students aren’t repaying the loans.
So far in 2010, legal action taken against other north Mississippi defaulters shows debts ranging from $19,646 to $61,703.
Mary M.’s daily interest is $28.08.
Generally, financial aid to college students comes from scholarships, grants and loans financed by banks and the federal government. Loan lenders must be repaid, plus interest.
One of the most common is the Stafford loan between students and private lenders, processed directly through the U.S. Department of Education.
Recently, The Chronicle of Higher Education reported that one in every five government loans that entered repayment in 1995 went into default. And the rate is higher for loans to students from two-year colleges, and higher still – 40 percent – for those who attended for-profit institutions.
Nationwide, that default rate is up to 7.2 percent from the previous year’s 6.7 percent.
The borrowers face damaged credit histories, and taxpayers face millions more lost in the long run.
Colleges can be penalized or cut off from certain types of financial aid, if their default rates get too high.
Five states have higher default rates than Mississippi and Kentucky’s 8.8 percent for borrowers who defaulted in the first two years of repayment.
Mississippi’s neighbors come in closely behind: Alabama, 8.5 percent; Louisiana, 8.6 percent; and Tennessee, 8.4 percent.
Arizona’s is the highest at 9.8 percent.
But The Chronicle’s research claims those numbers downplay the long-term cost of defaults and capture only “a sliver” of the loans that eventually lapse.

Mississippi aid
Nearly 2,800 of Mississippi’s 31,170 college loan borrowers aren’t paying back loans in the first two years they should begin, the Federal Student Aid program reports.
At the University of Mississippi, its director of financial aid, Laura Diven-Brown, noted the campus default rate is 4.1 percent for 2007, the most recent report.
That number represents 118 in default, compared to 2,876 in the repayment program.
In Northeast Mississippi, comparisons come with Mississippi State at 4.4 percent in 2007 (122 in default out of 2,712); Blue Mountain College 8.4 (9 of 107), Mississippi University for Women at 5.9 percent (35 of 593); Itawamba Community College, 11.4 percent (146 of 1,278) and Northeast Community College, 12.7 (71 of 555).
“We’re seeing an increase in demand for loans,” said Blue Mountain College’s Michelle Hall, director of financial aid. She credits the change to enrollment growth and tighter student budgets.
But she said she believes BMC is still in a good position with its loans and uses care with distribution of the aid by not depositing it all at once in student accounts.
FinAid.org, the financial aid information source, says that two-thirds of four-year undergraduates leave college with debt. Loans for graduate and professional students range from $27,000 to $114,000.
In Mississippi, public university tuition for one year averages about $11,000. That doesn’t include housing, food, books and other expenses.
Community college tuition for one year is nearly $2,000.
If you’re contemplating not repaying your college loans, think again, says Allen with the U.S. Attorney’s Office.
Even bankruptcy isn’t likely to erase a student loan debt.
While the legal difficulties may take years to get from the loan managers to the Washington, D.C., clearinghouse and down to regional offices like hers, Allen says they act on the cases.
“A large number of them end up with default judgments – people never answer them,” she noted.
But she said, most of the time, the federal government can find defaulters, garnish their wages or set up some other kind of payment plan to pay off the loans.
They even can intercept tax refunds until the debt is repaid.

Contact Patsy R. Brumfield at (662) 678-1596 or patsy.brumfield@djournal.com.