
                         Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: WEDNESDAY, August 25, 1993                   TAG: 9308250078
SECTION: NATIONAL/INTERNATIONAL                    PAGE: A-8   EDITION: METRO 
SOURCE: Associated Press
DATELINE: WASHINGTON                                LENGTH: Medium

LOAN DEFAULT RATES COULD COST SCHOOLS

The government identified more than 900 colleges and trade schools Tuesday that stand to lose their participation in the federal student loan program because their students too frequently default.

Among states, Alaska had the worst repayment rate. The Department of Education said more than 40 percent of the student loans in that state on which payments came due in 1991 were in default. Vermont, with a 5.1 percent rate, had the best record, followed by North Dakota's 6.9 percent rate.

The national average was 17.5 percent.

Six Virginia schools made the 1991 list. One is in Richmond, five are in the Tidewater area.

A 1989 law designed to drive down the number of defaults has allowed the Education Department to drop schools with default rates of at least 30 percent for three years. The current figures represent defaults in 1989, 1990 and 1991.

Those with default rates greater than 40 percent can be cut off from all federal aid programs, including the Pell Grant program.

Under federal law, schools included on the list will be barred from participating in the loan program unless they appeal either to the Department of Education or to the courts. If they do appeal, no action is taken until the appeal is exhausted, but very few schools win.

The biggest trouble spots in the Federal Family Education Loan Program, formerly called the Guaranteed Student Loan Program, were by far one- or two-year, profit-making career schools.

The Career College Association, a trade group representing proprietary schools, questioned the validity of the figures, saying the Department of Education unfairly counts loans that lenders do try hard enough to collect.

"While we continue to believe that default rates should not be the sole indicator of whether a school is educating and training its students well, if default rates are going to be used, at least they should be accurate," the association said.

David Longanecker, an assistant education secretary, said while the schools "are disproportionately represented," he did not believe "that the answer is to eliminate all schools that provide some certain kind of training."

However, he said, the government should develop strict performance standards to make sure that students attending those schools are properly trained.

In 1991, taxpayers lost an estimated $3.6 billion on bad student loans. Federal education officials estimate that the amount dropped to $2.9 billion in 1992 and will be about $2.5 billion this year.

The department has said the default rate is decreasing because of tougher collection methods.

by CNB