April 29, 2013

Colleges sue students over unpaid loans

About 5 percent of University students defaulted on Perkins loans in 2010-11.

As student debt rises, some schools nationwide are withholding degrees from graduates who default on federal loans.

The University of Pennsylvania and Yale University have both sued former students for unpaid Perkins loans, which provide low-interest loans to help “needy students” pay for postsecondary education, according to the U.S. Department of Education.

Federal Perkins loans are administered to students by their college. The University of Minnesota offers Perkins loans but declined to say if it had ever sued former students over loan debt.

But the University can withhold students’ transcripts if they have unpaid student loans, and the school will use collection agencies to collect student debt, Kris Wright, director of the Office of Student Finance, said in an email.

Of the 735 University of Minnesota students who entered repayment for Perkins loans in 2010-11, about 5 percent defaulted, according to the U.S. Department of Education.

The University of Pennsylvania filed at least 12 lawsuits in 2012 against students who defaulted on their Perkins loans, according to a Bloomberg article.

The university declined to comment.

Students must begin to repay Perkins loans nine months after they leave the University or when their enrollment status is less than half time.

Students are also still liable for unpaid student loans if they declare bankruptcy, Wright said.

Computer engineering junior Cassie Flug said her private high school wouldn’t send students’ transcripts to colleges if they hadn’t paid their tuition, and she understands why the University would do the same.

“If you don’t pay for the education, why should you get the benefit of it?” Flug said.

While computer engineering sophomore Isaac Gaskin said he understands why universities would withhold transcripts or degrees, he said he doesn’t think it’s practical.

“You need that degree in order to possibly get a career or a job that will pay off the loans,” he said, adding that it puts a “huge hindrance” on students.

Biology senior Nicollette Peters said she didn’t know universities could withhold transcripts and degrees but doesn’t agree with the idea.

“To withhold your actual degree … that’s not right,” Peters said.

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