CMU student loan default rate lower than national average
Student loan default rates at CMU are bucking the national trend.
The national student loan default rate for the 2008 fiscal year was 7 percent, up from 6.7 percent in 2007 and 5.2 percent in 2006, the New York Times recently reported.
However, the federal loan cohort default rate at CMU for the 2008 fiscal year was significantly lower at 2.3 percent. The number is lower than the 2007 fiscal year’s figure, 2.9 percent.
The federal loan cohort default rate is the percentage of the school’s borrowers who default on their loan prior to the end of the next fiscal year.
Approximately 80 percent of CMU’s on-campus students receive federal aid of some kind, a number that will eventually include Stevensville freshman Patricia Cudahy. Though Cudahy did not have to take out any loans this year, she said she will eventually need to and admits not being well-educated on the subject.
“Getting loans make me really nervous — it’s really intimidating,” Cudahy said. “I feel like for a lot of students, their only option is to go to school, so they do whatever it takes to get there without thinking about what the consequences of having so many loans will be in the future.”
For students who do default on their student loans, the financial ramifications can be extensive. Paul Natke, professor and chairman of the economics department, said once a person defaults on their student loans, it makes it difficult for them to get loans for cars and houses in the future.
As a greater credit risk, Natke said lenders can simply deny a person a loan, make them get a co-signer or charge them higher interest on the loan.
“You’ll either be denied or wind up paying more when you do have to borrow,” Natke said. “Without access to loans, there are a much more limited number of things you can buy.”
With the economic downturn, Natke said many students are having a hard time finding a job. Even if they find part-time work, it is not enough for the alumni to support themselves and pay off their loans, he said.
In such cases, Diane Fleming, associate director of Scholarships and Financial Aid, said there are many options for borrowers so they can avoid defaulting on their student loans. One of the options is to apply for hardship forbearance, which allows students without a job to work out minimum payments.
“The one thing they cannot do is just ignore it,” Fleming said. “If they see their monthly payment is something they cannot manage, there are all sorts of options for students.”
