August 23, 2013

Student loan default rates soar in Colorado

Alicia Evangelista, 30, who racked up more than $30,000 in student loan debt from CollegeAmerica, was at her Denver home Monday with her associate degree and student loan papers. "I'm trying my best, but it's hard," said Evangelista, who just pulled herself out of default. She said none of her credits will transfer toward the degree she needs to become a registered nurse. (Cyrus McCrimmon, The Denver Post)
At more than two dozen public, private and for-profit colleges in Colorado, thousands of former students have stopped paying on their federal student loans — and at least one school faces federal sanctions because the default rate is so high.

Schools blame the state's soft economy for the growing default rates among students attending all kinds of schools in Colorado. Just over 8,800 Colorado students, or 10.1 percent, failed to make an on-time repayment on a federal loan for nine consecutive months, according to 2010 data, the most recent available.

The rate tops the national rate of 9.1 percent.

In the Colorado mix, the vast majority with high numbers of defaulters are for-profit schools like CollegeAmerica and Lincoln College of Technology and far-flung public community colleges like Otero Junior College and Lamar Community College.

"I'm trying my best, but it's hard," said Alicia Evangelista, 30, who just pulled herself out of default after attending CollegeAmerica Denver for an associate degree in medical specialties.

She was paying $643 a month toward more than $30,000 in student loans. She earns $16 an hour. "My husband is working. ... We try to wing it."

At Otero, in La Junta, 104 out of 390, or nearly 27 percent, of the school's former students were defaulting on their federal student loans in 2010 — a statistic that could land Otero in trouble with the U.S. Department of Education next month if the numbers don't fall.

In a three strikes-type policy, the department allows two consecutive years of default rates over 25 percent before it places restrictions on the school's ability to access federal money. Schools often appeal this, and there were only two schools in the country that were in this trouble last year.

Otero president Jim Rizzuto said economic pressures in depressed La Junta have crippled his students' ability to find good work.

"We are keenly aware of this. We were always around 17 percent, but as the recession hit, we started seeing high numbers," he said.

College leaders say they are not happy with high default rates. It makes them look bad and flags them as problem institutions that burden federal taxpayers who ultimately are responsible for the unpaid loans.

"We always want to do everything humanly possible to have no defaults. No one wins that game, the institutions lose, the taxpayers lose," said Eric Juhlin, CEO of CollegeAmerica, which is headquartered in Utah and has a handful of schools in Western states. "At the end of the day, we want to provide as much opportunity to students and change their lives."

At CollegeAmerica campuses in Denver, Fort Collins, Colorado Springs and Cheyenne, default rates in 2009 and 2010 have bumped above 22 percent. The 2010 numbers were 26.2 percent.

Juhlin says they have created a default team to give counseling to students while they're still in school about what debt means and the importance of paying it off.

State statistics paint an interesting picture of college debt in Colorado: More students are attending school, which is good for the state's future workforce. By 2018, 67 percent of jobs here will require a degree.

But more students are taking on larger debts to pay for increasing tuition rates. At every public school in the state, the average debt load among graduates has significantly jumped from 2007 to 2012.

At some schools, debt loads rose more than 60 percent in five years. At Lamar Community College, the amount of debt students took on to pay for school leaped 119 percent — from $6,000 in 2007 to $13,000 in 2012, according to the Colorado Department of Higher Education.

At the state's two flagship public institutions, default rates in 2010 were below 5 percent. Only 2.9 percent of former Colorado State University students were not repaying federal loans that year and the University of Colorado at Boulder's rate was 3.5 percent.

Geri Anderson, vice president and provost for the Colorado Community College System, which has a number of schools with very high default rates, said students who drop out before finishing are more likely to default on federal student loans than those with new degrees.

Colorado's community college system recently started contracting with a company that, when a student misses a loan payment, reaches out to them and helps them put together a repayment plan.

"I don't want to give any excuses because we know it is an issue," Anderson said. "But we have a large number of first-generation students who don't have any family members who went to college. They don't understand that they'll have to pay that loan back."

Allison Sherry: 202-662-8907, asherry@denverpost.com or twitter.com/allisonsherry

Highest default rates in the 2010 cohort group of students

- Otero Junior College: 26.6 percent

- CollegeAmerica (includes Denver, Fort Collins, Colorado Springs and Cheyenne campuses): 26.2

- Lamar Community College: 25.5

- Trinidad State Junior College: 24.6

- Lincoln College of Technology: 24.1

The US Department of Education considers a borrower to be in default when he or she fails to make on-time repayment of his or her loans for nine consecutive months

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