Pa. students struggle, but keep up with loan payments
Mike Morris of Uniontown waits tables at the Stone House Restaurant and Country Grill in Farmington, one of his three jobs, so that he can make student loan payments of $400 monthly after attending Washington & Jefferson College.
Mike Morris of Uniontown waits tables at the Stone House Restaurant and Country Grill in Farmington, one of his three jobs, so that he can make student loan payments of $400 monthly after attending Washington & Jefferson College.
Mike Morris of Uniontown works three jobs, lives at home with his mother and sisters and is struggling to keep up with his expenses, including $400 a month in student loan payments.
Morris is a 2012 graduate of Washington & Jefferson College in Washington, which has one of the lowest default rates among area post-secondary schools at 4.1 percent. Morris said the idea of defaulting on his loans has crossed his mind more than once, but it’s not something he would act on.
“With defaulting, your interest is still going to build up. I try to be responsible and up to date with them and all my bills because it affects your credit rating,” Morris said.
And so he works 70 hours a week, tending bar at the Stone House Restaurant and Country Inn in Farmington, Ruby Tuesday in Uniontown and Uniontown Country Club.
But not all post-secondary students think like Morris or have the financial ability to meet their obligations after graduation. The rate nationally for students defaulting within three years of graduation is 14.7 percent for the 2010 fiscal year, up from 13.4 percent in 2009. According to the U.S. Department of Education, students at Pennsylvania schools are doing better at paying back their loans than many, with an average default rate of 11.9 percent, with 37 states or territories with higher default rates and only 14 with rates that are lower.
All of the area four-year universities have default rates lower than both the state and national averages. Some have exceptionally low default rates, such as Carnegie-Mellon University in Pittsburgh where the rate is 1.3 percent and Duquesne University in Pittsburgh where it is 3.5 percent. Morris’ alma mater, W&J, has a default rate of 4.1 percent.
At California University of Pennsylvania, the default rate is 7.2 percent. Mandy Schnorr, assistant director in the Office of Financial Aid at Cal U, said a low default rate is important both to a school’s reputation and also to avoid sanctions that could affect federal funding.
“If a school has a low default rate, financial aid can be disbursed in one single installment without any delay to students. This allows the school to receive payment faster, and, as a result, students can receive any refunds more quickly. If a school consistently has high default rates, it could lose eligibility to receive any federal financial aid, including Stafford loans and Pell grants,” Schnorr stated.
Schnorr said all students go through entrance counseling prior to receiving any federal loans, explaining the importance of paying back loans and the consequences of defaulting.
“Students are also required to complete exit counseling when they drop below half time, withdraw or graduate from the university. This also reminds them of repayment and how to avoid defaulting,” Schnorr said.
Schnorr said financial awareness counseling is also available online at http://studentloans.gov to provide additional information to students regarding their financial aid and finances in general.
“We also have financial literacy information on our website. This includes information regarding delinquency, how to prevent defaulting and the consequences of default. Our website also lists repayment options that may help students better manage repaying their loans without defaulting on them,” Schnorr said.
The default rate at proprietary, or for-profit, schools tends to be higher nationwide than it is for private or public schools that offer at least a two-year program. The national default rate for proprietary schools is 21.4 percent for those with a two- to three-year program and 22.1 percent for those offering a four-year program. That trend holds up in this region as well, where Laurel Business Institute in Uniontown, which offers associate’s degrees, is posting a 26.5 percent default rate and the Art Institute of Pittsburgh, which offers bachelor’s degrees, has a 25.4 percent default rate. The Douglas Education Center in Monessen has a 20.5 percent default rate, while Penn Commercial Business/Technical School in Washington has a 15.7 percent default rate.
The U.S. Department of Education is currently developing new guidelines for the proprietary schools in an effort to make sure students receive a meaningful education leading to gainful employment, which is expected to then translate into a lower default rate. A department publicist noted that students in the proprietary schools tend to be older students seeking retraining to enter a new career field and may be working, raising a family and have other financial obligations that may make meeting loan payments difficult.
Morris majored in fine arts and graphic arts. He would like to use that degree to become an art director in the film industry.
“I need to move to a city. Pittsburgh is a really good market, right now, but I really want to go to New York. I’ve lived here all my life,” Morris said.
But moving takes money, and, right now, that money is earmarked for his student loans and general living expenses.
“I’m a little bit more fortunate. One of my fraternity brothers had to get all private loans because his family fell into the category where they weren’t poor enough to get federal loans and weren’t rich enough to pay $220,000 for four years of college,” Morris said.
“He pays $900 a month for his, and that’s half of what he makes.”