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Cali Owings, Published October 03 2013

Fewer area students default on loans

FARGO – Nationally, the number of students defaulting on government education loans is up for the sixth consecutive year.

The national student loan default rate climbed to 10 percent for students who began paying back their federal student loans in fiscal year 2011 – up from 9.1 percent in 2010, according to data released by the Department of Education this week.

Loan default rates are lower than average for graduates of schools in Minnesota and North Dakota.

While North Dakota students leave school with an average $27,425 in debt, very few actually enter default. The default rate for North Dakota students entering repayment in 2011 was 4.3 percent. Minnesota’s rates are closer to the national average at 8.6 percent.

Default rates are even lower than state averages at Fargo-Moorhead area schools, but increasing in some cases.

At Minnesota State University Moorhead, 5.1 percent of borrowers, about 77 people, entering repayment in 2011 went into default, an increase from 3.6 percent in 2010.

Carolyn Zehren, financial aid director for MSUM, said economic recovery throughout the Upper Midwest is probably a driving factor behind the low default rates in the region.

In 2011, 96 percent of MSUM graduates were hired in a job related to their degree, according to a Minnesota State Colleges and Universities report.

Rates are low, but still increasing at North Dakota State University. The default rate for 2011 was 2.5, up from 2.1 two years before.

Though Concordia College graduates on average carry a higher debt burden than other students in the Fargo-Moorhead area, its default rate is the lowest in Fargo-Moorhead at 1.4 percent.

The average debt of a 2011 Concordia graduate was $35,240, but Steve Schuetz, vice president for enrollment, said the school’s low default rate reflects “students’ ability to pay that debt.”

Entrance and exit counseling is mandated for federal borrowers and personal financial aid counseling is required at area schools.

But despite ample information, Zehren said students lack the tools to understand debt before they start college.

Jeanne Enebo, director of Student Financial Services at NDSU, agreed. While students start to grasp the reality of their indebtedness toward the end of their college careers, she said prospective students aren’t looking that far ahead.

“I am not sure they are grasping the reality of it,” she said.

Still, Schuetz said students and parents are asking more questions about the true cost of attendance and student debt than before.

“They’re inquisitive about the amount of debt and type of debt that they take on and want to make sure they are making a wise investment,” he said.

The Department of Education tracks the number of students who did not make payments on their Federal Stafford Loans and Direct Loans for 360 days as a proportion of the number of borrowers entering repayment in a given fiscal year. There are incentives for schools with low rates and consequences for those that are consistently graduating students who don’t pay back their loans.

Two-year cohort student loan default rates FY2011:

National: 10

ND: 4.3

MN: 8.6

Average debt 2011 graduates

(Public and private 4-year schools)

National: $26,600

MN: $29,793

ND: $27,425

Two-year cohort student loan default rates (percent) FY2009-2011

2011 2010 2009

NDSU 2.5 2.3 2.1

MSUM 5.1 3.6 3.6

Concordia 1.4 1.8 0.9


Readers can reach Forum reporter

Cali Owings at (701) 241-5599