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Opinion: Student loan default rates show need for tuition reform

Michael Brown
Michigan’s student loan default rate is over 11%, Brown reports.

Using data provided by the Department of Education, LendEDU published a report that looked at student loan default rates for nearly 4,500 institutions in all 50 states and Washington, D.C. 

Nationwide, the student loan default rate was 10.1%; with 45 million student loan borrowers throughout the U.S., this means that 4.5 million Americans are facing the consequences of default right now. 

For the deservedly maligned for-profit schools in this country, the default rate has swelled to 15.2%, while nonprofit private schools and public schools posted default rates of 6.6% and 9.6%, respectively. 

In Michigan, a default rate of 11.56% ranked the state 39th when going from lowest to highest default rates. Institutions like Henry Ford College (21.8%), Lake Michigan College (19.7%), Jackson College (19.2%) and Oakland Community College (18.9%) floated the state’s figure upward, while Kalamazoo College (0%), Michigan State University College of Law (0.7%), University of Michigan (1.1%) and Hope College (2%) kept Michigan’s default rate somewhat grounded. 

When it came to Michigan’s fellow union members, states in the New England region like Massachusetts (5.82%), Vermont (6.17%) and Rhode Island (6.29%) had some of the lowest default rates, while Southern states including Mississippi (14.94%), West Virginia (14.63%) and Louisiana (13.5%) struggled to keep default rates competitive. 

Federal student loan default oftentimes comes after a payment is 270 days late, while private student loan lenders are not as forgiving and will usually leave between 90 and 120 days before declaring a borrower to be in default. The consequences can be severe, other than the damaging impacts it will have on a borrower’s credit score and ability to get approved for other financing. 

Extended default can lead to the garnishing of wages, tax refunds or Social Security benefits. There can be messy dealings with debt collectors and orders to appear in court that can result in U.S. marshals coming to a debtor’s door to arrest him or her if the orders aren’t followed. 

While irresponsible borrowing on the part of some students is part of the issue, the vast majority of the blame should and must be attributed to the colleges and universities that charge outrageously high tuition rates on a whim. 

This issue is only further exacerbated by the fact that a college degree is now seen as the prerequisite to success in the working world, leading many young adults to take on suffocating debt because they feel they have to in order to remain competitive. 

Action must be taken to bar higher education institutions from setting ridiculous tuition rates without rhyme or reason. Right now, there is no system of accountability in place to keep these campuses in check. X College thinks, “If University Z is charging $50,000 per year to attend, why don’t we?” 

To rein in colleges and universities in the U.S., we must hit them where it hurts everyone else that attends their campuses as students: their bank accounts. 

Schools that have a repeated and outlying history of high default rates and high student loan debt figures should be placed on the hook to become equal partners in repaying student loan debt. 

If these institutions start burning through their war chests to help both their graduates and dropouts repay their student loan debt, perhaps only then will we see a drop in tuition rates to manageable levels. 

Michael Brown is a research analyst with LendEDU.