PROVIDENCE, R.I. (WPRI) - More than 2,000 people who attended Rhode Island colleges and started repaying their student loans in 2009 have already defaulted, according to a WPRI.com analysis of federal data.
The overall student-loan default rate in Rhode Island was 11.2%, below the national rate of 13.4% but second-highest in New England, data published by the U.S. Department of Education shows. On Maine's 11.5% default rate was higher in the region.
Massachusetts reported a 7.3% default rate and Connecticut's was 9.8%. Vermont recorded the lowest default rate in the country at 5.7%, while Arizona's 22.9% rate was highest.
The default rates provided by the U.S. Department of Education do not include private loans.
National data shows that for-profit institutions combined to produce a default rate of 22.7% — more than double the rate of both public and private nonprofit colleges — and the figures were similar in Rhode Island.
At Lincoln Technical School, 570 of the 1,880 former students who started repaying in 2009 have defaulted, for a default rate of 30.3%. At the Sawyer School, which abruptly closed its doors in January, the default rate was 27%.
"That answers the arguments we've made around the for-profits for a long time," Dan Egan, president of the Association of Independent Colleges and Universities of Rhode Island, told WPRI.com. "The problem with the for-profit model is it has proved time and time again that it has lacked sustainability."
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Lincoln Tech and the Sawyer School did not respond to requests for comment.
Egan said he was pleased that default rates at the majority of Rhode Island's colleges fall below the national average, including at Brown University, which had the lowest default rate in the state at 1.5%. Providence College reported a 1.6% rate, with just 12 students defaulting.
Among the state's public colleges, the Community College of Rhode Island's default rate was 13.8%, while Rhode Island College and the University of Rhode Island reported 7.9% and 5.5% default rates, respectively.
"The financial aid increases have been pretty robust across the campuses," Egan said. "Schools have stepped up."
Egan said families should get part of the credit for the state's lower-than-average default rate because many are making more informed decisions about where they send their children to college.
"I would think the lesson of the last four years is people are being more thoughtful and starting to plan for college at a younger age," said Egan.
A report published last summer by the National Consumer Law Center said the primary reasons for students defaulting on their loans include the failure to complete school; low incomes and unemployment; the type of institution; lack of a high school diploma; and a lack of information about borrowing.
And when borrowers do fall behind on their student loans, the consequences can be severe, according to Deanne Loonin, director of the center's Student Loan Borrower Assistance Project.
"When I talk about the consequences of default, it's important to note the difference between federal loans and private loans," Loonin said. "The federal loans have the worst consequences if a borrower goes into default."
The Department of Education has said it is ramping up efforts to educate at-risk borrowers about repayment options, including a program that allows borrowers to limit their monthly payments to 15% of their discretionary income. The department also withholds student aid from colleges that report default rates of at least 25% for three years in a row.
"We continue to be concerned about default rates and want to ensure that all borrowers have the tools to manage their debt," U.S. Education Secretary Arne Duncan said following the release of the figures last year. "In addition to helping borrowers, we will also hold schools accountable for ensuring their students are not saddled with unmanageable student loan debt."
But Loonin said the government is still coming down hard on students who fall into default.
"The government can pursue borrowers forever with an arsenal of draconian collection tools, including seizures of tax refunds and even portions of Social Security benefits," she said.
For Egan, avoiding those penalties goes back to making smart decisions about where to attend school. He said he believes all students should attempt to earn a degree or certificate after high school, but he advises against attending a school that is unaffordable and the mountain of debt that can follow.
"The sticker price of an institution versus the net tuition price are very different," Egan said.