University of Wisconsin students are paying back their college loans at a much better rate than the national average, which has increased this year according to a new survey from the U.S. Department of Education.
A statement from the Department of Education announced the 2008 fiscal year loan default rate has risen to 7 percent, an increase from the 2007 rate of 6.7 percent.
Of the almost 3.4 million loans that entered repayment in 2008, 238,852 loans have been defaulted, the statement said. When a loan is defaulted, it means the payer has missed a scheduled payment.
Department of Education spokesperson Jane Glickman said the rise in students not paying their loans could be attributed to them struggling with the nation’s poor economy.
Glickman said the Obama administration is working to expand programs including grants to help students in financial need.
While the national default rate has reached 7 percent for all schools, UW student loan default rates remain significantly lower, according to Susan Fischer, director of UW’s financial aid office.
Fischer said the most recent data shows Madison at default rate at 0.6 percent. Of the 4,487 students who utilized federal Stafford loans in the 2008 fiscal year, only 28 students defaulted on their payments, Fischer said.
“This is a rate that as a school we can be very proud of,” Fischer said.
This new data is only a slight increase from UW’s 2006 fiscal year report of 0.5 percent defaulted student loans, Fischer said.
“My advice for students is to borrow as little as necessary,” Fischer said. “Separate what you want from what you need. Taking out loans to pay for tuition and books is usually OK, but taking out loans to ensure that you can eat at your favorite places isn’t a good idea.”
She added this is a very expensive thing to do, and it will bite you later.
Fischer said the worst thing a student can do is ignore their debt.
“It’s very important that student loans are paid off, as they can have a lot of long term effects if they are left unpaid,” Glickman said. “Students have to understand that these are loans, not grants. If they are not able to pay it back, they may not be able to get another loan or mortgage on their future home.”
The data released by the Department of Education shows the highest increase in default rates, at 11.6 percent, comes from for-profit schools.
Following for-profit schools, default rates for public schools increased from 5.9 to 6.0 percent and from 3.7 to 4.0 percent at private institutions.
UW freshman Brett Lotzer said he is taking out loans to pay for school but he is not worried about paying them back.
“I’m taking out student loans, but I’m not nervous about paying them back,” said Lotzer. “I’m confident that with an education from [UW] I’ll get a job after I graduate and be able to pay off all my loans with my income.”
