RALEIGH, N.C., Oct. 8, 2012 /PRNewswire/ -- The U.S. Department of Education recently announced that the Federal Fiscal Year (FFY) 2010 2-year national cohort default rate for student loans entering repayment rose to 9.1 percent. In contrast, the Department reported the default rate for loans originated by College Foundation, Inc. (CFI) and guaranteed by the North Carolina State Education Assistance Authority (NCSEAA) was only 2.8 percent.
This marks the ninth consecutive year in which the rate for CFI borrowers has been substantially lower than the national average. During that period the North Carolina rates have ranged from a low of 1.2% to a high of 2.9%, while national rates have ranged from 4.5% to this year's high of 9.1%.
Steve Brooks, executive director of North Carolina's guaranty agency, NCSEAA, credits ongoing CFI-NCSEAA low cohort default rates to "the personal attention and financial education we provide our borrowers." He continued, "Helping students find ways to honor their repayment responsibilities and avoid the negative consequences of default is something we take great pride in doing."
Wendy McAlister, president of CFI, concurred: "Our approach has been to start educating North Carolinians early about the many ways there are to pay for college. Then, if they decide to borrow an education loan, we have made sure they understood their responsibilities. And, for our borrowers in repayment, we work closely with them to find options if they encounter any financial difficulty."
For the first time, the Department also reported the official national 3-year cohort default rate. This new 3-year measure is being phased in by the Department in an attempt to provide more meaningful comparisons among lenders and institutions. The 3-year cohort default rate nationally is 13.4 percent. On this measure, too, defaults on CFI loans guaranteed by NCSEAA are considerably lower than the national rate, at 4.6 percent. In both the two year and the three year measures, CFI loans default at only about one-third the national average.
Looking into the future, with all loans now originated by the U.S. Department of Education and without guaranty agency involvement in preventing defaults, what will happen to borrowers? One indication might be the experience of students who had loans transferred away from their lenders and guarantors to the federal government during the financial crisis. As calculated by the National Council of Higher Education Resources (NCHER), loans that were transferred from their original lenders and guarantors to the federal government during the financial crisis have a FFY 2010 2-year default rate of 12.8 percent, nearly double the 6.5 percent of the loans still under their original service arrangement, and over four times as high as the CFI loans.
In commenting about the higher default rate on the transferred loans, Shelly Repp, NCHER president, spoke to what borrowers lost without the support of a guaranty agency: "Guaranty agencies and their lender partners have a nearly fifty-year track record providing effective, personalized delinquency and default prevention services. They have built a time-tested infrastructure that can reach borrowers in every county and state and should be a part of the solution to the student debt and default crisis."
About NCSEAA and CFI
- The North Carolina State Education Assistance Authority (NCSEAA), established in 1965, is the State agency that promotes access to higher education by administering financial aid and savings programs, informing students and families about paying for college, teaching educators about financial aid administration, and advocating for resources to support students.
- College Foundation, Inc. (CFI), incorporated in 1955, administers a large portfolio of education loans, several major grant and scholarship programs for students attending N.C. colleges and universities, and the tax-free "529" college savings program on behalf of the N.C. State Education Assistance Authority. CFI delivers information to North Carolina students and families on the programs it administers as well as other programs related to paying for college.
SOURCE College Foundation, Inc.