Despite the three-year national trend of federal student loan defaults decreasing in the United States, a recent report noted the loan default rate has increased for students in private nonprofit colleges.

The report was released by the United States Department of Education on Sept. 28. According to the DOE’s three-year cohort default rate report — which takes into account all public, private and proprietary schools in the U.S. — the nation’s student loan default rate has gone from 11.8 percent to 11.3 percent. In comparison, private colleges saw a rate increase of 6.8 percent to 7 percent.

Syracuse University, contrary to the rate increase noted for private colleges in the report, had a decrease in the rate of borrowers defaulting on federal student loans. SU’s default rate went from 3.3 percent to 3 percent.

The report, which has its share of critics claiming the cohort default rate can be manipulated by colleges, is based around the federal government’s fiscal year, opposed to a calendar year. The cohort default rate report released was for the fiscal year of 2013.

The latest report was calculated by the percentage of borrowers that fell at least nine months behind on paying a federal student loan, after entering repayment on a loan between Oct. 1, 2012 and Sept. 30, 2015.

The only loans used to calculate the cohort report are subsidized and unsubsidized federal Stafford loans and federal direct subsidized and unsubsidized Stafford/Ford loans. Stafford loans are the most common federal loans to be taken out by students.

According to the DOE, Federal Perkins, PLUS and insured student loans are not used in computing the cohort default rates. Data on default rates for these loans is published less frequently by the DOE, and is not as consequential for schools — considering the cohort report ties directly into whether a given institution continues to receive federal aid assistance. Private loans are not taken into account when calculating the cohort rates.

Between Oct. 1, 2012 and Sept. 20, 2015, SU had 113 borrowers enter default on a loan. In comparison, local colleges in Syracuse including Le Moyne College and Onondaga Community College had 38 and 430 students default on federal student loans, respectively. Both Le Moyne and OCC had an increase in default rates with the fiscal year 2013 cohort report.

“There could be a couple of different reasons, but I think it just goes to the marketability of SU degrees, and the fact that our students tend not to have problems finding jobs,” said Michele Sipley, director of financial aid at SU.

Sipley said she didn’t know why there was an increase in default rates for students leaving other private colleges, when compared to the continuing national trend of loan defaults decreasing in the U.S.

In this, Sipley is not alone. Other financial aid experts and consults are also mystified as to why private colleges had a small blip in what has been — much like the greater national trend — a steady decrease in loan defaults. Some argue that there is little merit in focusing on the slight increase of private college rates noted in the fiscal year 2013 cohort report.

“The resolution, the statistical significance is relatively weak. It’s not all that predictive,” said Mark Kantrowitz, a financial aid expert and the publisher of a financial literacy website Cappex.com. “And part of that is because you can have a cohort default rate even if you have just 30 borrowers enter repayment.”

Kantrowitz said the overall national trend seen over the last three reports — fiscal years 2011-13 — is a much better indication of where the percentage of loan defaults is going in the U.S.: down.

Donald Heller, an education expert who is the current provost and vice president of academic affairs at the University of San Francisco, also noted that he was unsure why private colleges had an increase in default rates in the fiscal year 2013 report.

USF, like SU, bucked the loan default rate increase seen by many other private colleges in the report, with a decrease in the percentage of defaults for fiscal year 2013. USF went from a default rate of 2.7 percent to 2.3 percent.

Heller said USF, a private nonprofit college, had not changed or reworked their financial literacy programs for students during the time period of the report. Rather, he believed his university simply rode the wave of an improving national economy, and that in turn positively affected the default rate.

Sipley agreed with Heller, saying the improvement in the economy is one of the factors playing into the decrease of loan defaults, likewise, at SU.

However, she also said the recent introduction of income sensitive repayment options and the university’s financial literacy program are contributing factors in the rate decrease at SU. The repayment plan was pushed forward by the Obama Administration, where students’ loan repayments are more in sync with the estimated income they will make in their chosen professions following college.

Derek Brainard, SU’s financial literacy coordinator, said he believes the combination of newer financial literacy endeavors at SU, personal financial coaching and the initial startup of SU’s financial literacy program has had a positive impact on the university’s default rate.

“Our vision is 100 percent student engagement in our financial wellness activities,” Brainard said. “That student that sits through that (personal financial) session, even once or twice while they’re here at Syracuse, has a much lower chance of defaulting, to be quite frank, because they’re in a better position to manage their finances.”

Published on October 12, 2016 at 12:37 am

Contact Sam: sfogozal@syr.edu | @SamOgozalek