Student loan default rate doubles

The federal loan default rate for GW students doubled from 2006 to 2007, but remains far short of the national average, according to statistics from the Department of Education.

The University’s official student default rate in 2007 was 1.2 percent, more than double the 0.5 percent who defaulted in 2006. Over the same period, the national average increased from 5.2 percent to 6.7 percent the following year.

Dan Small, executive director of the Office of Student Financial Assistance, said that though the jump was concerning at first, the doubling of the University’s default rate only represented a handful of extra defaulters because fewer students were repaying loans. Only 30 GW students defaulted in 2006 and 38 in 2007.

“For the past several years the default rate has ranged from as low as 0.2 percent to 0.9 percent,” Small said in an e-mail. “When I saw this year’s figure [it] was a little concern but further looking at the numbers GW students know they have a responsibility in paying their loans and they take it seriously, even in these economic times.”

The default rate only includes federal loans like Stafford Loans and is calculated by fiscal year. That means the most recent rate was calculated using students who entered repayment from Oct. 1, 2006 to Sept. 29, 2007 and those who defaulted from Oct. 1, 2007 to Sept. 29, 2008.

Defaulting affects students’ credit history and credit score negatively, Small said, but the damage can be managed effectively.

“Those students we speak to, we advise them to make minimum payments, or seek forbearance, speak to a lender… Most students do find by speaking with the aid officer most are able to keep their credit history intact and complete payments on their loans,” Small said.

Mark Kantrowitz, publisher of financial aid support Web site FinAid.org, said a default rate of 1.2 is excellent.

“You will find that’s very good even for private nonprofit (schools),” he said, “who are among the schools that have the lowest default rates.”

Schools in the District average a 4.3 percent rate, while private institutions nationwide average at 3.7 percent. Georgetown University’s default rate held steady at 0.2 percent, while American University’s default rate rose from 1.0 to 1.8 and Catholic University’s doubled from 0.6 to 1.2.

Kantrowitz said the default rate was expected to rise because of the bad economic climate. When the unemployment rate rises, he said, the default rate also rises because students find it harder to repay their loans.

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