Utah gets an A+ in repaying student loans

Utah gets an A+ in repaying student loans
Education Â» Officials hope to keep loan-servicing role as Congress nationalizes program.
By Brian Maffly
The Salt Lake Tribune
Updated: 10/16/2009 06:22:55 PM MDT

Utah's student-loan default rate has slipped to the nation's lowest, thanks in large part to an intervention program that helps delinquent borrowers stay current on payments.
State higher education officials contend the program has more than halved the default rate, now at 2.1 percent for students who left school in 2007. The Utah default rate, which is less than a third the national average, is exhibit A in their argument for preserving the states' endangered role in servicing student loans.
"It's really amazing, especially in this recessionary economy. The credit also goes to our students who take debt seriously," David Feitz, the Utah Higher Education Assistance Authority (UHEAA) executive director, told the Board of Regents on Friday.
UHEAA services all federally guaranteed loans made to Utah students under the Federal Family Education Loan program, even those who attend traditional private and for-profit schools.
In 2005, Utah's default rate spiked at 4.3 percent, prompting UHEAA to launch its "Ray of Hope" program, which initiates contact with delinquent borrowers to help them get current. Under national definitions, student loans are in default after nine months of delinquency.
"We even go to people's homes with a kit to help them get a deferment or a forbearance," Feitz said.
While UHEAA gets some credit, Utah's relatively strong job market and lower student-debt loads, which average about $13,000, may also
Advertisement

play a role in the low default figures. Other high performing states are Montana, South Carolina, North Carolina, Wisconsin, all with default rates of less than 3 percent. Some big states have seen their default rates climb above 10 percent in recent years, according to Department of Education data Feitz provided Regents.
Students themselves are the primary beneficiary of the state's excellent record of debt repayment, officials say.
"It means fewer telephone calls, fewer collection letters that have to be sent, we can keep our expenses low, and traditionally UHEAA has passed along the savings back to the students in the form of interest rates discounts," Feitz told Regents.
State officials are eager to find a way to keep UHEAA in the student-loan servicing business, which would be centralized under reform proposals supported by the Obama administration.
President Obama's plan is to take profits realized by private lenders by having the Treasury originate all loans and plow the savings, as much as $87 billion over the next decade, into Pell Grants. But Utah campus officials are concerned this overhaul would shift workload from the states and banks onto schools, already struggling with surging enrollment and financial aid demand, on top of the deepest budget cuts in 20 years.
"It's like one of these unfunded mandates," said Dennis Klaus, vice president for business services at Salt Lake Community College where demand for student loans has shot up 55 percent this year. "We would have to add incredibly to staff and under these budgetary constraints we wouldn't have the funds to do so."
Last month, the House passed a bill that would cut states out of their traditional loan-servicing role, drawing opposition from Utah's Republican Sens. Orrin Hatch and Bob Bennett.
"Replacing UHEAA with a federal student loan monopoly will result in lower quality service for students and schools, no competition and no choice for consumers, more staff and expense to colleges and universities, and higher delinquency and default rates for borrowers," Hatch wrote to Senate committee leaders on Sept. 28.
Both Utah senators are pushing compromise legislation that would keep high-performing states in the game, and at least one influential Democrat appears sympathetic.
"A one-size-fits-all federal direct loan program does not acknowledge all the hard work and experience of nonprofit student loan programs and their tremendous staffs," Vermont's Sen. Patrick Leahy said on the Senate floor Wednesday. "I will be working hard to ensure a role for nonprofit financial aid agencies."
bmaffly@sltrib.com