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SERIOUS MONEY: Kim Woody continues to pay off student loans long after graduation.
Rockie Lee/Genesis
SERIOUS MONEY: Kim Woody continues to pay off student loans long after graduation.

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Education | Students are taking on massive debts without thinking of the future. One result: Default rates, even at Christian colleges, have grown

Issue: "Unstoppable?," April 20, 2013

When Kim Woody visited the hilly, tree-covered campus of Bryan College for the first time in March 2005, she knew she’d found the place she wanted to spend the next four years. The small school in Dayton, Tenn., about an hour east of Chattanooga, offered the Christian education she wanted, close to home. But it didn’t come cheap.

During that first visit, Woody and her mom sat down with the financial aid director to find out how much her degree would cost and how she could pay for it. He handed them a piece of paper that detailed tuition, room and board, and other fees, about $20,000 per year. That’s a lot of money, Woody remembers her mom telling the director. Then she asked him what options they had, other than taking out loans, to pay for it.

“He just sort of shrugged and said, good luck with that,” Woody recalled eight years later. “He didn’t really offer any help or anything.”

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Woody had several small scholarships that gave her about $6,000 per year, leaving her with a $14,000 annual bill. Her parents offered to pay for half, but for the rest, Woody felt she had little choice but to take out federally subsidized loans.

At the time, it seemed like an investment, and very few people she met on campus were getting an education loan-free. Everyone looked at it as a cost of doing business, or at least getting qualified to do business. She and her classmates had so much optimism about what they would accomplish in the world, she said. But just after the start of their senior year, the economy collapsed, dragging down their optimism with it. By the time they walked across the stage in May 2009, they understood they were entering a changed world where getting by would be a lot harder.

Six months after they picked up their diplomas, Woody and her fellow borrowers received their first loan payment note from Uncle Sam. Woody had a teaching job at a small Christian high school in Memphis. She only earned $21,000 a year. By the time she made her student loan payment and her new car payment, she had little left over. Like many of her former classmates, she moved back in with her parents to make ends meet.

Woody never missed a payment, but others did. By the end of 2010, 23 of her fellow Bryan graduates—6.5 percent of those who took out subsidized loans—had stopped making payments for an entire year, ending up in default.

Among Christian colleges, Bryan had one of the worst default rates in 2010, higher than the 5.2 percent national average for private schools. Despite their emphasis on financial responsibility as an extension of a Christ-like character, many Christian colleges struggle as much as their secular counterparts to make sure students pay back what they owe.

Of 18 Christian colleges WORLD reviewed, three had default rates higher than the private school average in 2010—Union University in Jackson, Tenn., Palm Beach Atlantic University in West Palm Beach, Fla., and Bryan. Only three had default rates below 1 percent—Bob Jones University in Greenville, S.C., Cedarville University in Cedarville, Ohio, and Gordon College in Wenham, Mass.

David Haggard, Bryan’s current director of financial aid, blames the school’s default rate on the economy. The tough times hit the students in Bryan’s adult degree completion programs especially hard, he said. As the economy improves and graduates have an easier time finding jobs, borrowers will feel more confident in repaying what they owe. He also hopes the school’s new financial education efforts will help more borrowers realize they have no excuse for going into default. The government offers income-based repayment plans, which could temporarily wipe out the monthly payment for borrowers who don’t have jobs. Borrowers also can apply for forbearance or deferment, depending on their circumstances.

The school’s biggest challenge is getting the information to the students, Haggard said. Woody doesn’t remember Bryan offering any kind of financial seminars during her time there. But today, the school offers one-on-one financial counseling with incoming students and group sessions for graduates. Administrators get lists of students who miss payments, and a financial aid counselor calls each one to see what the school can do to help.

Palm Beach Atlantic University (PBA) adopted similar measures after watching its default rate jump to 8.4 percent in 2009, up from 5.9 percent the year before. In 2010, the rate dropped to 6 percent—56 of the 927 students who took out federal loans defaulted. The school now requires all graduates to take an online financial literacy course. Administrators also offer in-person exit counseling. And they’ve stopped giving students a full loan package when they enroll. Instead, financial aid counselors talk to students about how much they really need to borrow and encourage them to take out only what they must to pay for school.

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