National student loan default rate down

Penn's rate of 1.6 percent is already much lower than other universities' The national student loan default rate -- the percentage of student loans that do not get paid back -- has recently dropped sharply, but this has little correlation to the University's default rate, which is already much lower than at other schools, according to Bill Schilling, director of Student Financial Aid. The rate that borrowers across the country default on student loans dropped to 11.6 percent in fiscal 1993, the latest year for which figures are available, according to a report by The Associated Press. This is currently the lowest rate since official default rate statistics reporting began in 1988. The rate has continued to decline steadily since 1990, when it peaked to 22.4 percent. Schilling said the University's loan default rate is generally one of the lowest in the nation. "In the beginning of this year, our loan default rate was approximately 1.6 percent," Schilling added. "Generally, it does not get above 2 percent." Although the decline in national default rates has not had any direct measurable impact on the University, these statistics are "good news for the federal government, taxpayers and other students," said Assistant Vice President for Policy Planning David Morse. According to AP reports, increased collections on loans, combined with the lowering default rate, have reduced the net cost of defaults to $400 million in fiscal 1995, down from $1.7 billion in fiscal 1992. "Our collections on past defaulted loans are recouping more taxpayer dollars than ever before," Education Secretary Richard Riley told AP. "Preliminary numbers for this year show this positive trend in collections continuing." This success can be partially attributed to an increase in litigation against defaulters, which increased from 200 accounts in fiscal 1995 to 708 accounts in the first quarter of the fiscal year that began in October, according to AP. Earlier this year, students were faced with a Republican reconciliation proposal, which would have required students to begin paying the interest on their loans within four months after graduation. The original House proposal would have also required institutions to pay a 2 percent tax on the total volume of their student loans -- this tax was then reduced by the Senate to .83 percent. The original plan would have cut $10 billion from the national budget, reducing the deficit by $1.2 billion. But the plan was "killed pretty quickly," according to Morse, and will not be implemented in the near future. "Congress is currently working on alternative ways to cut the budget, but in the future we may see other plans for the government to generate savings from student loans," Morse added. The Associated Press contributed to this article.