Reading, Writing, and the Arithmetic of Student Loan Defaults

The rising cost of both public and private higher education, coupled with the effects of the recent global financial crisis, has begun to drive a significant increase in student loan default rates. These defaults, set against a backdrop of cuts to state education budgets across the nation, have forced colleges and universities to try to conserve already limited resources and eliminate or reshuffle staff, making it more difficult to manage default prevention initiatives internally. How is your institution handling the economic downturn and subsequent budgetary effects?

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Student Loan Defaults by the Numbers

According to data released by the US Department of Education in February 2011, loan default rates at public, private, and for-profit colleges and universities are on the rise. In the for-profit sector, for example, the default rate among students who entered repayment in 2008 was 11.6 percent based on a two-year measurement period. But under a more stringent three-year tracking period enacted by Congress in 2008 and set to take effect next year, that same default rate at for-profit schools would more than double to 25 percent.

Complex Risk for Colleges and Universities

Many of the acute financial problems colleges and universities presently face mirror the fundamental structure of the institutions themselves. Undeniably academic campuses are centers of learning. But they also function as microcosms of larger entities such as cities and towns, replete with similar complexities. Universities educate students, but they also provide housing and food; they provide the site of social interaction and development; they offer various forms of entertainment; and they are responsible for basic services like trash collection and security.

What are the key sources of direct pressure on colleges’ financial health?

• Fewer donations
• Nationwide cutbacks
• Low rate of full loan repayments
• Download the paper for a full breakdown of how these factors affect students and colleges alike.

In order to help colleges and universities—and the students they serve—confront head-on the numerous fiscal challenges they currently face, NCO Group has assembled the following list of questions intended to serve as a foundation for academic institutions to assess their internal capabilities and needs, and to weigh the advantages that derive from strategic partnerships with specialized external service providers.

Ask yourself:

• Is your institution’s cash flow being hampered by rising delinquencies and defaults?
• Has your school been forced to allocate funds away from default prevention or recovery efforts due to budgetary constraints?
• Have budget cuts led to staffing cuts? Have these choices negatively impacted the quality of non-instructional services to your students?
• Download the paper for the other 8 questions to assess your needs

Michael Klozotsky
Managing Editor, insideARM.com

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