Texas second in nation on student loan defaults

Texas second in nation on student loan defaults

09/18/2009

Associated Press

The slumping economy led Texas to finish second in the nation for the rate of federal student loan defaults at 9.3 percent.

"There's no question in our minds that the recession has had an impact," said George Torres, an assistant vice president for Texas Guaranteed Student Loan Corp.

The U.S. Department of Education put the national default rate at 6.7 percent, up from 5.2 percent the previous fiscal year. Arizona had a borrower default rate of 9.8 percent.

The figures are for students whose first loan repayments were due between Oct. 1, 2006, and Sept. 30, 2007, and who defaulted prior to Sept. 30, 2008.

U.S. Secretary of Education Arne Duncan, in response to figures released Monday, said the economic downturn "likely had a significant impact on the borrowers captured in these rates."

The department says schools with excessive default rates may lose eligibility from one or more federal student aid programs.

The Dallas Morning News reported Friday that the Texas default rate, over the latest three reporting periods, climbed from 5.8 percent, to 7.1 percent, then the 9.3 percent.

Those who attended for-profit schools are most likely default on loans. In Texas, the latest rates are 16.5 percent at for-profit colleges, 7.7 percent at public colleges and 4.9 percent at private, nonprofit schools.

One reason for the higher default rate for Texas was the state has a greater share of low-income students, who could have more trouble repaying loans. Texans also have to rely more on federal loans because the state offers relatively less aid, according to Torres.

The Texas Guaranteed Student Loan Corp. has several programs to help people repay loans and avoid default, said Torres, urging borrowers to seek more information.

"It's everyone's responsibility," Torres said.

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