As the economic recession drags on, a report released Monday by the U.S. Department of Education showed that the number of college graduates unable to pay back their student loans is on the rise.
According to the report, the national default rate has reached a nine-year high of 6.7 percent for 2007, up from 5.2 percent in 2006.
“The economic downturn likely had a significant impact on the borrowers captured in these rates,” Education Secretary Arne Duncan said in a statement.
While still lower than the national average, default rates for Minnesota students increased from 2.9 percent in 2006 to 3.3 percent in 2007.
The new rates reflect students who were scheduled to begin loan repayment by September 2007. Students who failed to make payments by September 2008 were considered in default.
The average default rate for the University of Minnesota in 2007 remained at the previous 2006 rate of 1.5 percent. The report showed that 122 University students defaulted on their loans in 2007, up slightly from 107 students in 2006.
“Students need to be aware of their student loan debt at all times,” said Tom Schmidt, Office of Student Finance associate director.
While he agreed that the economy has played a key role in student loan defaults, Schmidt added that students taking out more money to cover increasing tuition and living expenses has also contributed to the problem.
Results from the CollegeBoard’s 2008 Trends in Student Aid report showed that an estimated 60 percent of bachelor’s degree recipients borrowed to fund their education. Of those who borrowed, the average debt upon graduation in 2007 was nearly $23,000, up 18 percent from the 2000 average of $19,300.
Schmidt advised that students should only be borrowing what they need, and said he believes some students are “living better than they probably need to live.”
For those graduates who have already defaulted on their loans, Schmidt stressed the importance of communicating with loan lenders. Most loan companies have programs to help students pay back their loans, including consolidation and loan forgiveness programs for certain fields of study, he said.
The Office of Student Finance requires student exit interviews for all loans through the University upon graduation to help students plan for repayment.
Boynton Health Service also offers free financial counseling to all students through Lutheran Social Service Financial Counseling.
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