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Issue: "Unstoppable?," April 20, 2013

Todd Martin, PBA’s financial aid director, agrees with Haggard about the role the economy plays in pushing graduates toward default. But he also thinks some students are just more likely to default, no matter what the school does. When schools are more selective about the students they accept, focusing on higher test scores and grade point averages, they tend to have fewer students taking out loans, he said. Students with lower scores and grades coming into college typically have higher financial needs and borrow more.

PBA wants a mixture of both types of students, but the school is offering more scholarships now in hopes of attracting higher-achieving students. As the campus demographic changes, so should the default rate, Martin said: “We want all students here, but we want to make sure we have a slice of students that are highly motivated leaders on campus because they bring an influence to the whole student body.”

Bob Jones University (BJU) saw the biggest increase in the number of students taking out federal loans—from 1.6 percent in 2008 to 11 percent in 2010. But only 3 students—0.6 percent of borrowers—defaulted that year. Like Bryan and PBA, BJU has a default prevention plan that requires financial counseling and includes calls to former students who miss payments. The difference between BJU and other schools is its students, Director of Financial Aid Kevin Delp said.

Slightly less than 40 percent of BJU students take out loans, both federal and private, but the majority aren’t wealthy. They just work hard to earn money to help pay for their schooling, Delp said. But work ethic and responsibility are hard to quantify, and other factors likely play a role.

Four of BJU’s top degree fields are in high demand and offer better starting salaries than the average liberal arts degree—nursing, accounting, criminal justice, and engineering. From a practical standpoint, graduates with those degrees have a better chance of finding a job and earning enough to pay back their loans, Delp admits.

Caleb Helms, an accounting major, had a job even before he graduated from Union University in 2009. He described his degree as almost recession-proof because companies need accountants, whether they’re making money or not. But Helms, 25, didn’t have to worry about paying back loans. When he started classes at Union in 2005, he decided he wouldn’t borrow anything, if he could help it. Knowing he would have a fixed income and a lot of steady expenses when he graduated, Helms viewed college as a time to work as hard as he could to prepare for the rest of his life: “As much as possible, I wanted to get ahead of the game and stay out of debt.”

Helms worked during high school to save up for college and held down two jobs during most of his time at Union. A scholarship covered almost half the $20,000 annual cost. His grandfather chipped in about $5,000, and Helms paid for the rest. He doesn’t remember talking to many of his friends about their debt, although most of the people he knew who had loans intended to go into ministry or some other field that didn’t pay very much. Many of them went on to graduate school after getting their bachelor’s degrees.

When students take out loans, they think they’re postponing the bill for their education for a time when they can afford it, Helms said. But they don’t realize they’ll end up paying much more over time for the four years during which they actually spend the money: “Not everyone who defaults is financially illiterate but it definitely plays into it,” Helms said.

Both Haggard, at Bryan, and Martin, at PBA, said students don’t think enough as freshmen about how they will pay off their loans once they graduate. Woody admits she didn’t. All she thought about was getting an education. But her history major and biblical studies minor turned out to be less valuable than she expected.

“I thought I was making an investment in my education,” she said. “That justified taking out loans, but then I got out and realized I might have to start flipping burgers just to pay for this terrible decision I made to borrow money. It seemed like a terrible choice.”

Financial aid counselors believe their schools’ default rates will go down in 2011, data the government will release later this year. Students who entered college after Woody and her classmates had more time to prepare for a dismal job market. They also had more warnings about how difficult life would be if they left school with heavy debt loads. And they’ve had more attention from counselors attuned to the dangers of excessive borrowing.

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