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October 11, 2000

Student Loan Default Rates

For the second straight year Calvin College has a student loan default rate of 1.9 percent, well below the national rate for fiscal year 1998 of 6.9 percent. Calvin also was below the Michigan average of 6.8 percent, based on 181 schools, 4,798 borrowers in default and 70,904 borrowers in repayment.

In West Michigan many schools were well under the national and state average with Grace Bible (0%), Calvin (1.9%), Hope (1.9%), Reformed Bible (2.2%), Cornerstone (2.9%), Aquinas (3.8%) and Grand Valley (4.4%) leading the way. Grand Rapids Community College was just above the national average at 8.1 percent but dropped from 15.8 percent in 1996 to register one of the area's biggest two-year declines. Local seminaries also had low default numbers with Calvin Theological Seminary at zero percent and Western Theological Seminary in Holland at 4.5% based on just one student in default.

Nationally, default rates a decade ago were three times as high as they are now. The national rate was 17.2 percent in 1988, soared by 1990 to 22.4 percent, but then dropped to 17.8 percent in 1991, the single biggest decline ever. Since then default rates have continued to fall each year, including a drop from 8.8 percent in 1997 to 6.9 percent in 1998. However, part of the reduction in default rates from 1997 to 1998 came as a result of a change in the way the rates are calculated. The Higher Education Act extended by 90 days (from 180 to 270 days) the period the government waits before it declares a borrower to be in default. A story in the October 13 issue of the Chronicle of Higher Education quoted Education Department officials who acknowledged that half of the reduction in default rates from 1997 to 1998 came as a result of the 90-day extension.

The issue has become a partisan one from a political standpoint with President Clinton and U.S. Secretary of Education Richard W. Riley announcing the recent decline at an October 2 news conference, contrasting it to the 22.4 percent rate of 1990. The secretary credited a robust economy, strong department management, tougher enforcement tools authorized by Congress and stepped up efforts by colleges, lenders, guaranty agencies and other participants in the federal loan programs. Republicans, however, were quick to point out that the 4.4 percent decline from 1990 to 1991, the biggest drop ever, took place under President Bush and they credit the efforts begun under the Bush administration for the continuing declines.

Officials at Calvin are less concerned with the partisan political implications of the rates and more interested in maintaining what has been a consistent trend at the liberal arts college. Historically Calvin has been a state and national leader in default rate and school officials say they work hard to ensure that Calvin student fulfill their loan obligations. In 1999-2000, approximately 94 percent of Calvin's students received financial aid in one or more programs with the average need-based award coming to almost $11,000. About 61 percent of that was in the form of scholarships and grants and 33 percent came from the loan program.

NOTE: The default figures as compiled by the U.S Department of Education represent the proportion of borrowers who defaulted within 12 to 24 months of leaving college. Because a school may appeal its default rates, the numbers on the U.S. Department of Education's website reflect default rate data as of October 2, 2000.

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Contact Phil de Haan.