PSU Tops in the Big Ten for Student-Loan Defaults
Penn State counts the highest student-loan default rate among all 12 universities in the Big Ten, according to a report shared Tuesday.
In fact, the default rate last year among Penn State students and graduates was 3.4 percent, exactly double the Big Ten average of 1.7 percent, federal data show.
And this year, the reported default rate among Penn Staters has climbed to 4.5 percent, university Associate Vice President Anna Griswold said.
"Our default rate has been increasing annually for several years," she said in a report to the Penn State Faculty Senate. "This is a matter of concern for our former students who have difficulty repaying their loans."
She and the Senate's Student Life Committee are looking into whether the university should develop more-comprehensive financial-literacy initiatives for students. Such programs could help better prepare students to manage their repayments and reduce default rates, including on credit-card accounts, Griswold said.
Judged against national college-student-loan default averages, Penn State stacks up favorably. The national average was 7 percent last year and has jumped to 8.8 percent this year, according to U.S. Department of Education data.
But that seemed to be little consolation Tuesday to faculty senators at Penn State, some of whom gasped at the PSU-specific figures.
The student-default rates weren't the only figures Tuesday that showed Penn Staters in relative fiscal distress. Among other highlights of Griswold's presentation:
- The average student-loan debt for undergraduates in the Big Ten was $24,443 for those graduating in 2009-10. But at Penn State, the average was $6,700 more than that. "Several differences accounts for this," Griswold said in prepared remarks. "Among the Big Ten schools, we enroll a higher percentage of students from low and moderate family incomes, have the largest enrollment, and we rank seventh in the availability of institutionally funded grants and scholarships."
- From 2000 to 2010, the total amount of money annually borrowed by Penn State students via education loans has tripled. It's now in the range of $600 million to $700 million a year. (For context: Penn State's total annual budget is in the range of $4 billion.)
- In the same decade, from 2000 to 2010, the number of Penn State students borrowing money to attend school has grown 33 percent. About two thirds of graduating Penn State seniors now carry some loan debt. The median loan debt for a Penn State undergraduate graduating in 2009-10 was $31,1333, up from $22,690 -- as measured in current dollars -- a decade prior.
- A student graduating with $30,000 in loan debt probably would need to make at least $37,000 annually in order to handle his or her debt obligations adequately, Griswold said. Anyone making less than that would like fall into difficulty making the regular payments, she said.
Griswold pointed to a couple key elements in explaining the high debt loads carried by Penn Staters. Tuition rates have grown over the past decade as "funding from federal and state grant programs" has been mostly flat, she said.
Meanwhile, as Penn State has "made great strides in increasing its scholarship and grant funding, the average award to students has remained fairly flat due to enrollment growth and efforts to provide scholarships to more and more students," she went on.
"The resultant gap between costs and grants and scholarships must be made up through student and parent education loans or from family income or college savings -- both of which have been in jeopardy for many (of) the last several years," Griswold said in her prepared remarks.
Since the early 1990s, tuition rates at Penn State have more than tripled, often ranking the university among the most expensive public schools in the U.S. Penn State leaders have often tweaked the state government, which is among the least generous in the country in its fiscal support of public higher education.
That, university executives have said, has put more pressure on Penn State to raise tuition. Critics in Harrisburg, however, have tended to say the university should be more prudent in managing its costs.
Whatever the case, the students bearing the burden of higher tuition rates can benefit from basic money-management and budgeting skills, Griswold said. She said financial-literacy information -- also useful for managing credit-card habits -- is not available consistently to all students at Penn State.
"Currently, the approach at Penn State is rather passive," Griswold said.
She said the Faculty Senate committee is continuing its work on the subject. The Senate is scheduled to convene again on Dec. 6.