8 - The Michigan Daily - Friday, September 10, 1993
Government acts to streamline student loans

,U' default rate is below average 'High student default rates are often the product of
student dissatisfaction with their education.'

'U' supports new loan program

Py DAVID SHEPARDSON
DAILY STAFF REPORTER
New figures on University student
loans show modest increases in de-
faults, but substantially less than the
national average, a trend which elicited
positive reactions from Universityoffi-
dcials.
The U.S. Department of Education
reported last week that the 1991 student
default rate for the Guaranteed Student
Loanprogram(GSL) is 2.1 percent for
the Ann Arbor campus, which is down
from 2.5 percent for 1990. The rate is
based on the number of students that do

not pay off loans after graduation.
In a statement, Education Secretary
Richard Reily said despite the record
number of colleges with high student
loan default rates, many schools loan
records remain favorable.
'Despite the increase in sanctions,
many schools' commitment to quality
post-secondary education has insured
low default rates," Reily said.
Tom Butts, associate vice president
for government relations, attributes the
University's low default rate to the high
quality of a University education.
"High student default rates are often

- Tom Butts
associate vice president for government relations

1in I


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the product of student dissatisfaction
with their education," Butts said.
But government reported default
rates are higher at the other two Univer-
sity campuses. The Dearborn campus
GSL default rate is 5.5 percent and the
Flint campus default rate is 7.0 percent.
Assistant Financial Aid Director Al
Hermsen attributes the higher rates to
the fact that students at the other two
campuses are more transient.
"Those campuses are commuter
colleges and more independent and as
such are more likely to leave college
before graduation," he said.
Dropout rates at Dearborn and Flint
are proportionately higher and admis-
sion standards are generally lower than
the Ann Arbor campus.
Despite the weak economy and the
large number of graduates without per-
manent jobs, default rates have surpris-
ingly not seen dramatic increases. Edu-
cation department economists attribute
this to extensions of payment schedules
by colleges.
For the University collected Perkins
Loan program, default rates are moder-
ately higher this year. For the 1992-93
school year, the default rate was 5.32
percent, up from 4.6 percent the previ-
ous year.
But Hermsen cautioned that the
change in the default rates is by and
large due to a change in the formula for
calculating default rates.
The University's collection office,
headed by Jane Wilson, employs six full
time bill collectors to track down dead-
beat graduates.

After a graduate misses loan pay-
ments, the University sends letters urg-
ing them to repay their loans. This is
followed by phone calls by University
collection officials. Officials will work
with graduates to set up an extended
payment schedule for graduates who
are unable to pay.
For those who default, the Univer-
sity imposes a number of sanctions,
including placing afinancialholdcredit
on their student account, preventing
them from receiving copies of tran-
scripts and other services and reporting
defaulters to national and local credit
bureau reporting services.
Students agree to the penalties for
not paying loans when signing promis-
sory notes.
Wilson said in an interview yester-
day evening that she was pleased with
the University's low default rate, noting
that the federal government does not
impose sanctions unless the default rate
approaches 30 percent.
"I think we have a good rate com-
pared to other schools that I have talked
to," Wilson said.'Mostpeopleare pretty
good about repaying their loans but
some we have to get after."
Of the 9,000 colleges and universi-
ties on which the Department of Educa-
tion keeps default rate statistics, a esti-
mated 900 are being sanctioned for high
default rates. Many are technical or
speciality schools like truck driving,
hairstyling and bartending programs.
The highest rate in Michigan was a
Flint-based hairstyling salon with a71-
percent default rate.

By DAVID SHEPARDSON
DAILY STAFF REPORTER
The University has formally applied
for inclusion in the Federal Direct Stu-
dent Loan pilot program, aprogram that
would potentially benefit millions of
studentsandone that University admin-
istrators have long urged be adopted.
Under the plan, students would bor-
row money directly from the federal
government rather than through home-
town banks.'The University would ad-
minister the program and have students
sign promissory nos.
The one-page, fill-in-the-blank ap-
plication is a preliminary requirement
that was completed last week. Guide-
lines for a longer application will ap-
pear later this month in the Federal
Register, amonthly listing of the Clinton
administration's new regulations.
Approximately 5 percent of Federal
Guaranteed Student Loans (GSL) are
expected to be funded under this pilot
program created under thenAmendments
to the Higher Education Act of 1990.
The Direct Student Loan Program,
(DSL) is currently pending before the
U.S. House of Representatives. It would
replace the mish-mash of federal loan
programs that are run through outside
financial institutions, primarily banks
and local lending institutions.
The plan, endorsed by President
Clinton, has bipartisan support in Con-
gress and would generate new money
by saving the interest costs paid to out-
side agencies. The money could be used
to increase funding for student loans at
a time when federal and state funding
foreducation has decreased orremained
constant. A Government Accounting
Office estimate places the interest sav-

ings at $8.3 billion.
The University would still adminis-
ter the Perkins Loan program, under
regulations currently proposed, but Al
Hermsen, assistant director of the Of-
fice of Financial Aid, speculated that
Congress would eventually include the
Perkins program in the DSL.
Tom Butts, associate vice president
for government relations, said the Uni-
versity has long supported the creation
of such a program. At a presentation
before the University Board of Regents
last spring, officials touted the benefits
of the DSL program and remained con-
fident that the program would be
adopted.
Opposition to the program is prima-
rily limited to banking and lending in-
stitutions who would lose billions in
interest payments from students.
In an interview this summer,
Duderstadt said he was confident that
the University would be included in the
pilot program. Given House Education
and Labor Chair Bill Ford's (D-Ann
Arbor) close ties to the University, other
campus officials have commented that
inclusion of the University seems likely.
However, Ford's presence in Wash-
ington has not always guaranteed Uni-
versity admission in federal educational
programs.LastMay, the University was
not included in the President's "Sum-
mer of Service," a pilot program for the
soon-to-be-implemented National Ser-
vice Program. University officials had
also expressed optimism for the service
program before receiving the bad news.
A final decision on the list of schools
tobe included is expected by Jan.1. The
first direct student loans would not be
made until September 1994.

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Michigan Union
Building Access

i

Friday
Saturday

Solar car's next stop: Australia

A primary goal of the Michigan Union is to provide a stimulating and
diversified array of services and activities to members of the University
community. As a part of the effort, we continually assess our ability to
insure that the Union environment is as safe and secure as possible. To
help achieve these objectives, we want to let you know about our
procedure for access to the Union.

By MICHELLE FRICKE
DAILY STAFF REPORTER
While the University's solar car team
is maintaining the momentum itreached
during its victory this summer, team
members will take a break from their
hectic schedules to display their car,

Maize & Blue, and answer questions on
the Diag today from 11 a.m to 4 p.m.
After winning Sunrayce'93 on June
26, the 21 undergraduates immediately
began preparing their car for the World
Solar Challenge, which starts Nov. 7.
This race spans 1,864 miles of the Aus-


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tralian outback.
Team members are logging count-
less hours at their preparation site near
the Ann Arbor airport to prepare the car
for its flight to the outback on Oct. 1.
"Most of the changes we're making
are with the powersystem, as well as the
internal electrical system,"said Furqan
Nazeeri, team project manager. "We're
replacing half of the solar cells with
more efficient and, unfortunately, a lot
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But the team is spending even more
time contemplating the logistics oftrans-
porting its equipment and team mem-
bers to the north coast of Australia.
"We sent a semi-trailer by boat al-
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about two weeks," Nazeeri said. "Each
of the 20,000 items it contained had to
be weighed and priced to go through
customs: '
Pending the availability of funds, all
21 members will fly toAustraliaon Oct.
5 and return to Ann Arbor in mid-De-
cember.
Although they will be up against
multimillion-dollar solar cars and pro-
fessional racing teams, the University
students are not afraid of the competi-
tion.
"Even though Toyota and Nissan
have abudget 10 times bigger than ours,
we're confident we can beat them be-
cause they've never raced before,"said
Andrew Walberer, the team strategy
leader. "We definitely have a chance to
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