By Lynn Hatter
http://stream.publicbroadcasting.net/production/mp3/wfsu/local-wfsu-986599.mp3
Tallahassee, FL – The number of Florida students defaulting on their student loans in on the rise. The state now ranks in the top 10 in the country for student loan default rates. And Regan McCarthy reports schools with climbing default rates could eventually lose the right to offer their students Federal loans, but in the mean time schools are adding more costs.
Florida's federal student loan default rate for fiscal year 2009 is 10.5 percent. That's compared with the eight-percent reported in 2008. Bill Spires is the director of Tallahassee Community College's Financial aid office. He says there are countless factors that could affect a student paying back his or her loan. He says the state of the economy and the tough job market are obvious culprits, but he says there are other less obvious reasons students might default. For example, states with a higher percentage of immigrant students are more likely to have a higher default rate. And he says sometimes it's because students are taking out bigger loans in order to support their lifestyles.
"There is no doubt and no one can deny that the economy is playing a factor in student loan defaults. As unemployment goes up so does student default rates. But we also know that there are other factors that play into that. And we know that borrowing for lifestyle is one of those. We know that students who over borrow tend to default at higher rates."
Spires says TCC is trying to get a handle on the issue by requiring students to take a "loan literacy seminar." The class explores how student loans should be spent, how much is too much, and the total amount a student is allowed to borrow during their four years in college. But he says students are keep themselves in debt for what are sometimes the wrong reasons.
Benesha Brown, a student at TCC says she mostly uses her student loans for tuition and books but admits it's nice to always make sure she has a little extra just as a backup.
"Like when winter time comes, I find I probably don't have enough clothes, but I try not to shop with it. I put it in my banking account so that when hard times do come I have that money."
Institutions whose default rates get too high risk losing their ability to offer Federal loans, but Spires says to some extent the school's hands are tied. TCC is a community college meaning the school is required to accept all students. And Spires says typically students who require more remediation are more likely to default on their loans. But he says TCC isn't allowed to make loan decisions based on that statistic.
"We can suggest and we do to students that you probably shouldn't be borrowing, but we cannot tell them that your loans is denied unless we have a very specific reason."
Spires says an acceptable reason for denying a loan might be if the college knew that the student had previously defaulted on a loan---but Spires says the school can't run credit checks on the applicants. TCC's default rate is at about 18-percent. Compare that to Florida State University where the default rate is about 3-and-a-half-percent. Spires says that's because of the differences between the students FSU admits those who come to TCC and because fewer students who attend FSU need loans. Take Peter Lebhar, for example. He' an FSU student and says he doesn't need loans, in fact he says he's sure there are students on his campus who have student loans, but he doesn't know any of them.
"It's getting hard and harder to get into FSU, and so that means that the kids who get into FSU mostly qualify for bright futures, so you don't run into a lot of kids who are paying big hefty chunks of tuition."
But the director of student finance at FSU, Darrel Marshall, says the default rate at his school has increased about a half-a-percent over last year. Beyond economic and unemployment issues he attributes the increase to a change in the way Federal Loans are supervised.
"All schools must now enter what's called the Federal Direct Student Loan Program, versus before that time were an institution that participated in the Federal Family Educational Loan Program."
Marshall says now the university is working to create its own programs to keep students from defaulting. He says he doubts students are spending so much more for option university services that they've begun defaulting more frequently now. He also doesn't think the school's 15 percent tuition increase this year is having a major impact. And TCC's Spires agrees. He says at the community college the 10.5 percent tuition increase the college announced earlier this year will amount to about 10-more dollars for each credit hour and he says that's not an amount he expects will make or break a student's ability to pay back his or her loan.