While Tennessee’s student loan default rate is among the worst in the nation, local colleges are posting better results.

Data published this week by LendEDU rank Tennessee 40th among the states, with a default rate of 11.57% for fiscal 2016, compared with 10.1% nationwide. The figures are based on the most recent data released by the U.S. Department of Education, last month, for nearly 4,500 schools.

LendEDU notes that Southern states typically have higher default rates.

While nationally two- to three-year public colleges posted a 15.9% default rate, Pellissippi State Community College’s was 11.4%.

Maryville College posted an 8% default rate, which is lower than the national average overall but higher than the 6.3% average for private four-year schools.

“This is a slight uptick,” Erin Johnson, MC’s director of financial aid said, from a 5.1% default rate the year before. Johnson said she has heard other Tennessee colleges also saw a rise over the past year.

“We are looking very carefully at our default management processes,” she said.

LendEDU reported a 4.7% default rate for the University of Tennessee, and 18.1% for the Tennessee College of Applied Technology — Nashville. No specific data was available for TCAT Knoxville.

A school with an exceptionally high default rate can lose its eligibility for federal student aid, while borrowers who default can face credit problems for years, such as when attempting to buy a car or house, or have wages and other payments garnished.

Pellissippi’s progress

Pellissippi State has cut its student loan default rate nearly in half, from 22.7% in 2013. That’s when the community college created a Default Aversion Unit, using students under a federal work-study program to reach out to alumni at risk of default.

They make a “courtesy call” — not a collections call — to borrowers who are 60 to 90 days late making a payment and ensure they know the options available, such as income-based payments. “You don’t have to go into default,” said Dick Smelser, director of financial aid for Pellissippi State.

A federal student loan goes into default when a payment is 270 days late, so a month before that happens Pellissippi State’s team will make another call. Smelser said 80% of the time they resolve the situation so the former student doesn’t default.

Pellissippi State has cut the number of students in default from about 320 to 152, he said. “I don’t know why other schools aren’t doing this.”

Borrowing is also down at the community college. Smelser said the Tennessee Promise scholarship and Tennessee Reconnect grant have had a huge impact.

During the 2018-19 school year Pellissippi had 980 borrowers with an average loan total of $4,300, compared with 2,960 borrowers with an average loan amount of $4,700 in 2013-14.

“Student loans are a last resort option,” Smelser said. “There are other ways to pay for college.”

MC educating

Maryville College is beefing up its education for graduates about loans, Johnson said.

“Students are not always fully aware of whom to talk to when they have an issue,” she explained. The student loan servicer is there to help, she said, “and they can come back and we will help them.”

Johnson said she will sit down with borrowers to identify the student loan servicer and help them log in to an online portal.

Borrowers don’t need to pay someone else to complete forms that are free, she noted.

“Loans can be an excellent tool to finance the right education for the right student,” Johnson said, with a current interest rate of about 4.5%.

But the information can be daunting.

She recommends that families review financial aid offers carefully. “Just because you don’t have to make a payment while you’re in school doesn’t mean you don’t have to think about it,” Johnson said.

In fact, making payments while still in school will reduce interest paid later.

Amy Beth earned her degree from West Virginia. She joined The Daily Times in 2016 on the education beat covering Alcoa, Maryville and Blount County school systems.

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