Universities crack down on delinquent student borrowers

Defaults on federal Perkins loans reached almost $1 billion during the 2010-11 school year. Those are loans for the lowest-income college and grad students. Some colleges have turned to the courts to try to get that money back. Schools like Yale and the University of Pennsylvania have been in the news for suing their former students for unpaid Perkins loans.

Unlike other federal loan programs, the college lends the money and is responsible for getting it back.

“They could be much more flexible and they have more discretion before they litigate these cases, to work with borrowers and to provide some assistance,” says Deanne Loonin with the National Consumer Law Center. But she says the law actually requires colleges to be aggressive.

Lawsuits are a last resort, says Harrison Wadsworth, executive director of the Coalition of Higher Education Assistance Organizations. The group represents schools that participate in the Perkins loan program. He says the money recovered helps other low income students pay for college.

“Every dollar that is collected in repayment for Perkins loans goes to make education possible for a current student,” he says.

Wadsworth says defaults on Perkins loans have actually been falling. That may be because the dollar amounts are smaller than other student loans. He says the average loan is around $2,000 per year.

About the author

Amy Scott is Marketplace’s education correspondent covering the K-12 and higher education beats, as well as general business and economic stories.

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