Default rate dips below cutoff; Revised figures put Lane at 29.7 percent

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The U.S. Department of Education has approved challenges to the data it uses to calculate Lane students’ default rate, inching the college away from a threshold beyond which Lane stands to lose all federal financial aid.

The 2008 Higher Education Opportunity Act prescribes that penalty when, for three consecutive years, 30 percent of a school’s graduates default on their loans within the first three years of repayment.

According to preliminary numbers published in February, approximately 30.7 percent of Lane borrowers who began repayment in the 2010 fiscal year defaulted before September 2013.

This would have been the second year Lane passed the 30-percent mark, but the college filed an appeal to reduce the pool of borrowers by 11 and the number of students who defaulted by 17, which pushed Lane’s rate out of the danger zone to approximately 29.7 percent, Lane Director of Financial Aid Helen Faith said.

In the borrower pool, eight had died before they defaulted, she said. “How can you go into default if you were dead at that time?”

As for the other 17, Lane challenged erroneous repayment dates and abbreviated grace periods, the six-month periods between when students stop going half-time and start repaying their loans.

In addition to the yearly figures, which won’t be finalized until September, Lane receives a monthly update from the National Student Loan Data System. According to the most recent update, approximately 28.5 percent of Lane students who began repayment between April 2011 and March 2012 have defaulted, a figure that Faith said leaves her “cautiously optimistic.”

“The signs are pointing to improvement, which makes sense, because the economy has been improving,” she said, although Faith worries that recent news coverage “suggests that Lane is on the brink of collapse.”

“I realize that sells newspapers, but … it’s important to remember that we’re only in the draft phase of the second year,” she added.

In an opinion piece published in The Register-Guard, Lane President Mary Spilde explored the myriad reasons for Lane’s high default rate: a recession that hit Oregon “faster and deeper,” low income, reduced state funding and rising tuition.

Lane is one of three Oregon community colleges in the danger zone, according to the National Student Loan Data System. Klamath Community College’s draft default rate is 33 percent. Umpqua Community College’s 38.5 percent draft default rate puts the college perilously close to the Department of Education’s penalties for any school whose default rate exceeds 40 percent in a single year.

The Department of Education has yet to levy sanctions on any U.S. colleges or universities.

“Community colleges are not banks,” Spilde wrote. “Federal regulations do not allow colleges to assess creditworthiness … . Instead, we are required to disburse financial aid to almost anyone who applies and yet, if a student defaults, colleges are held accountable for something over which we have little to no control.”

Student government President-elect Michael Weed agreed.

“It’s unfair for the federal government to hold the school responsible for what students (do),” he said. “It’s not quite fair to community colleges.”

A year at Lane will cost students between $10,000 and $15,000, according to Lane’s website. According to the White House College Scorecard, Lane students borrow, on average, nearly $12,000, leaving them with an estimated $136 monthly loan payment once they graduate.

Lane disbursed $95 million in grants and loans to more than 11,000 students in the 2012-2013 school year, Faith said. Approximately 77 percent of eligible Lane students receive some form of aid.

Should the college lose its federal financial aid, students would have to rely on private loans and scholarships.

“It’s really important that students — particularly if they’re borrowing a lot — are aware of what their options are so they don’t just give up out of hopelessness,” Faith said.

Those options include alternate repayment plans, forbearances and deferments, Faith said, as long as students do their due diligence in keeping contact with lenders after college.

To achieve that end, Faith and Weed want `to implement a student-run call center to improve students’ understanding of their financial aid and their responsibilities upon leaving Lane.

“It might be a little easier for students to deal with another student that’s in a similar boat than somebody who’s sitting on the other side of the fence,” Weed said.

As a second-year environmental sciences student looking to transfer to Oregon State University, Weed has already accrued approximately $16,000 in loan debt while at Lane. He doesn’t plan to accept any further loans — instead, he’s trying to finish his two-year degree on a small grant and conserve the remainder of his financial aid for his time at OSU.

Nonetheless, learning about Lane students’ high default rate, their reliance on financial aid and the consequences the college could face for yielding a high rate of delinquent borrowers was a wake-up call.

“The whole reason behind community colleges in the first place is to help nontraditional students achieve the same thing as traditional students,” Weed said. “Not everybody can just go out and get a full-time job and then still survive out there and have enough left over to pay for school.”

Graphic design student Ryan Ritchey, who earned a transfer degree without taking out any loans, said he is considering borrowing for the first time because “it’s hard to pick up on ladies when you’re like, ‘hey, I live at my mom’s house,’ but at least she has a hot tub.”

Ritchey sees a loan as a path to financial independence, but he plans on limiting his borrowing to $10,000.

“Anything more than that, I’d feel like I’m just digging myself deeper into the pit,” Ritchey said.

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