By Alicia Jacobs, Excelsior Life Staff--
National news reports indicate student debt is now a trillion dollars. On average, school loan default rates are increasing, while educational costs continue to rise. Debts impact students. Conversely, student loans impact higher education.
Media focus is often placed on student debt, but a student's ability to repay their student loan does have consequences to an institution and default rates are monitored by the Department of Education (DOE).
On a national level, more students are borrowing more money than ever before to receive a degree,” said Christina Roarke, Excelsior College’s assistant director of financial aid. “Couple that with higher unemployment and other economic hardships and you get a record number of students having greater difficulty repaying their loans.”
The DOE uses the CDR (Cohort Default Rate) in one respect, as a measure of a schools capability and quality. At Excelsior College, 2011- 2 year draft Cohort Default Rate stands at 4.0 percent, well below the national average of approximately 13 percent. For institutions that have a consistently high CDR, there are ramifications.
A college can…
• Lose access to private loan funds.
• Be subject to sanctions if the schools 2yr default rate exceeds the federal cap of 15% or 3yr default rate exceeds the federal cap of 25%.
• Lose eligibility to provide federal financial aid to their students.
A higher cohort default rate for schools creates a domino effect for students and schools, and even impacts the economic health of our country.
“A school’s cohort default rate has far-reaching consequences, and the implications of a “bad” or high default rate can be devastating. Between the current economic environment and the changing federal student aid landscape, the government is looking more closely at the quality of a school’s education, the degrees a school offers, and whether or not they lead to gainful employment,” Roarke explains. “The government wants to be assured that higher education institutions are providing quality education in relevant areas of study, working hard to keep students on track to graduation, and making sure students understand their rights and responsibilities if they are borrowing to pay for this education.”
With this in mind, the DOE along with higher education institutions are working to create awareness of student loan repayment options. Helping students access the tools and resources to avoid the negative consequences of defaulting on student loans is a priority. For example, there is a plan referred to as Income-Based Repayment. It caps monthly student loan payments at 15 percent of their discretionary income.
“The DOE wants us to live up to our mission as an institution of higher education,” said Roarke. “They are beginning to create new and revised measures of program quality and effectiveness.” The result is tougher regulations and harsh consequences for a failure to serve students well.
It is important for an institution to provide students with all the tools they need to be successful in understanding the financial aid process, student loans, and options for repayment. “At Excelsior College we support student success throughout the entire educational process, this not only translates into a low CDR but more importantly, qualified students graduating with affordable, quality degrees,” said Roarke.
Readers note: This is Part 2 of a feature story on student debt. To read Part 1, Excelsior College Students’ Median Debt is Substantially Less Than The National Average, click here.
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