The headline is probably familiar "17 Doctors in 8 States Default on Student Loans." David A. Feitz says he always hears about it - or a similar one - when he's sitting on an airplane and his seatmate asks what he does for a living.
"All the public ever seems to hear is how students default on their student loans," said Feitz, the Utah assistant commissioner of higher education for financial aid.The public's image of a student loan program awash with deadbeats bothers Feitz. He said nothing could be further from the truth, and he should know. He oversees the state's student loan programs with the Utah Higher Education Assistance Authority, which the regents established to manage the loan programs.
The vast majority of Utah students - and students across the nation - are conscientious borrowers.
Only 7.4 percent of Utah students default on their student loans. In other words, 92.6 percent - or more than nine out of 10 students - faithfully repay their government-guaranteed student loans.
That's slightly better than the national average of a 9.7 percent default rate or 90.3 percent repayment.
The Utah default rate before collection efforts is 9.4 percent, but the state's aggressive collection efforts drop the default rate to 7.4 percent. Feitz said a program could be devised with an even lower default rate, but that would mean restricting eligibility and cutting out many of the students who need help the most.
Studies show the profile of the typical defaulter as someone who is young, has a small loan balance, has not completed his education, comes from a low-income family and is more likely to have attended a trade school, technical school or community college.
"There has to be a balance between fiscal responsibility and social responsibility. Because society has determined that access to higher education is important, somebody has to pay, and sometimes that comes with defaulted student loans," he said.
Utah's collection efforts are persuasive. In fact, only seven states can claim a better recovery rate. And if normal collection efforts fail, there are always the courts.
Currently, Utah has 3,427 unsettled lawsuits against borrowers. That may seem like a lot until it's viewed against the whole program. In 1986-87 alone, 20,000 Utahns borrowed $54.4 million.
Nationally, the Guaranteed Student Loan Program is the largest federal financial aid program with an annual volume of $9 billion and 3.8 million recipients.
Actually, there are several student loan programs in Utah. The best-known, and by far the largest, is called the Utah Guaranteed Student Loan Program, which was known as the federally insured student loan program before 1977.
It's guaranteed because the federal government assures it will repay the lender, a local financial institution, if the borrower defaults. When a default occurs, the money is repaid from a pool of insurance premiums that are paid up-front with every loan. Then Utah bills the U.S. Education Department for reimbursement, Feitz explained.
Throughout a student's undergraduate and graduate study, he can borrow up to $54,750 through the Guaranteed Student Loan program. Repayment begins six months after the student graduates or drops out of school.
Despite the program's success, the amount that can accumulate worries Feitz and others, particularly the regents. A student who borrows the maximum at the program's existing 8 percent interest rate would be saddled with a payment of $664.27 every month for 10 years.
"We've created a generation of debtors. If the person becomes a doctor or an engineer, he can probably handle that payment. But what if the person becomes a teacher or a social worker or something else that society also values, where is he going to get the money for a $664.27 student loan payment in addition to a mortgage, a car payment and all the other expenses?" Feitz asked.
No Utah student has yet borrowed the entire $54,750, although a few have student-loan debts of more than $40,000 each, he said.
Two other programs managed by Feitz's regent-directed office are PLUS, a program where parents can borrow money for undergraduate students, and Supplemental Loans for Students, formerly known as Auxiliary Loans to Assist Students, which is available for dependent students who have extenuating circumstances that preclude the parents from borrowing under PLUS.
The maximum amount that can be borrowed in each of those programs is $20,000. Using all three programs, a student could conceivably borrow $94,000 to pay for his education. Although no Utah college or university would have costs approaching that amount, it's not out of bounds for a professional school the likes of a Harvard or a Stanford, Feitz said.