THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Friday, September 2, 1994 TAG: 9409020579
SECTION: FRONT PAGE: A7 EDITION: FINAL
SOURCE: ASSOCIATED PRESS
DATELINE: WASHINGTON LENGTH: Medium: 60 lines
Defaults on student loans are declining as indebted graduates scramble to ``do what's right,'' and the government uses new tools to dig into their wages and tax refunds in case they don't.
Taxpayers are expected to spend $2 billion this year paying off uncollected student loans, down from a peak of $3.6 billion in 1991, Education Secretary Richard Riley said Thursday.
``After years of rising defaults, it's going the other way,'' he said.
The proportion of loans in default dropped to 15 percent in 1992 - the latest year for which figures are available - from a high of 22.4 percent two years earlier. Virginia's average - 14.9 percent - was slightly lower than the nation's.
``What it demonstrates is that the country is not made up of a bunch of people trying to con the federal government,'' said Leo Kornfeld, deputy assistant education secretary.
``The large majority of people are trying to do what's right.''
In Southeastern Virginia, five trade schools and Eastern Shore Community College face the loss of eligibility for all student aid programs because of their high rates.
The business schools are: Jan-Mar Beauty Academy of Newport News, with a 40.3 percent default rate; Suffolk Beauty Academy, 37.8 percent; National Education Center-Kee Business College Campus of Newport News, 33.5 percent; National Education Center-Kee Business College Campus of Norfolk, 33.5 percent; and Virginia School of Hair Design in Hampton, 28.1 percent.
Eastern Shore's default rate was 35.6 percent.
As usual, federally backed loans for students of beauty, hair and cosmetology schools were among the hardest to recover.
The government took its biggest gamble in Nevada, where three gaming schools joined a long list of other institutions to drive up the state's default rate on student loans to 34 percent, by far the country's highest.
Louisiana (23.1 percent), Connecticut (22.3), Alaska (21.1), Florida (20.9) and California (20.1) were the other states where more than one in five student loans was in default.
Borrowers in Montana, North Dakota and Vermont were the best at paying up. Less than 6 percent of ex-students in those states defaulted on their loans - defined as going at least six months without a payment.
The government has toughened student loan rules in the last few years, lowering the benchmark for penalizing schools with high default rates, garnishing the wages and income-tax refunds of delinquent borrowers and making it harder for them to get credit cards and other loans. ILLUSTRATION: Graphic
DEFAULT RATES
North Carolina 14.3%
Virginia 14.9%
United States 15.0%
by CNB